Investor Update August 3, 2017

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Transcription:

Investor Update August 3, 2017

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 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 service 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 financial measures such as Adjusted EBITDAX, Adjusted Cash Operating Costs, Adjusted EPS, and Adjusted General and Administrative Expenses. Definitions of these measures and reconciliation between U.S GAAP and non-gaap financial measures are included in the Second Quarter 2017 Financial and Operational Reporting Package at epenergy.com. 2

Brent Smolik Chairman, President and CEO 3

Focused Execution Drives Improved Performance Operational Performance Delivered oil and equivalent production growth above expectations Improved operating efficiencies Reduced annual base production decline rate Financial Results Reduced adjusted cash operating costs quarter over quarter and sequentially Generated $179MM of Adjusted EBITDAX Liquidity of ~$1.1B at 06/30/17 Financial Flexibility Executed $157MM of open-market debt repurchases YTD Added 2018 oil and 2019 natural gas hedge price support Completed Altamont drilling JV Delivering on 2017 targets with increased efficiencies Note: See the Second Quarter 2017 Financial and Operational Reporting Package, available at epenergy.com, for the Company s non-gaap reconciliations and definitions. 4

2Q 17 Operations Summary Program Gross Completed Wells Equivalent Production (MBoe/d) Oil (MBbls/d) NGLs (MBbls/d) Natural Gas (MMcf/d) Eagle Ford 9 41.5 26.4 7.8 44 Wolfcamp $73 $MM Wolfcamp 21 25.4 9.9 7.4 49 Altamont 5 18.0 12.6-32 Eagle Ford $30 Altamont $25 Total Company 35 84.9 48.9 15.2 125 2Q 17 Total Capital $128MM Higher production with less activity and lower capital 5

Reduced Adjusted Cash Operating Costs Adjusted Cash Operating Costs ($/Boe)¹ Higher production volumes Lower adjusted G&A expenses $14.24 $13.42 $1.84 $1.97 $3.82 $2.63 Managing business with reduced headcount Lower non-payroll costs $3.30 $3.75 Improved operational efficiencies $5.28 $5.07 2Q'16 2Q'17 Managing labor, disposal and supply chain costs Completed activities faster Taxes, other than income taxes Adjusted G&A Transportation and commodity purchases LOE Continued to mitigate inflation Note: See the Second Quarter 2017 Financial and Operational Reporting Package, available at epenergy.com, for the Company s non-gaap reconciliations and definitions. 1 2Q 16 excludes the impact of the sale of the Haynesville Shale asset which closed on May 3, 2016 6

Asset Programs Clay Carrell Executive VP and COO 7

Eagle Ford: Improved Efficiencies and Program Returns Averaged one drilling rig Production continues to benefit from 1Q activities Base production beating expectations Improved operational efficiencies Drilled longest lateral to date (10,753 ) 27.3 24.0 Oil Production (MBbls/d) 22.2 23.9 26.4 Achieved a record of 16.4 pumping hours and 11 stages in a single day Reduced LOE: 2Q 17 - $4.35; 2Q 16 - $4.70 2H 17 Continue with one drilling rig 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 Reduce completion activities 8

Wolfcamp: Ramping Up Activities 6.8 9.3 Oil Production (MBbls/d) 11.4 11.1 9.9 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 Averaged two drilling rigs Gross production relatively flat to 1Q 17 Net production impacted by 2H 17 Greater number of 50% working interest JV wells Higher royalty impact from sliding scale (April/May) due to higher trailing oil price Timing of completions Reduced base production decline Continue with two drilling rigs Significant completion increase Increase production volumes each quarter (2H 17 ~25% higher than 1H 17) 9

Wolfcamp: Operating Efficiencies Offsetting Inflation Costs Drilling Set new spud to total depth record of 2.8 days Spud first Upton County well with lower cost design Completions Achieved a record of 21.5 hours of pumping time and 10.5 stages in a single day Frac Crew Pumping Hours/Day 21.5 Facilities Increased the number of wells flowing to existing central production facilities (CPFs) 13.2 15.2 LOE Improved cost with increased water recycling and expanded SWD pipeline capacity 2016 Avg Best Pad YTD Best Day YTD 2Q 17-$4.63/Boe vs 2Q 16-$5.18/Boe 10

Altamont: Improved Results 11.0 11.7 Oil Production (MBbls/d) 12.1 11.9 12.6 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 Averaged two drilling rigs Record 2Q production results Achieved record daily production levels in May All five new well completions in 2Q IP s > 1,000 BOPD 16 recompletions averaged above type curve Reduced base production decline Realized prices improved to 95% of WTI Improved program returns Completed new drilling JV 2H 17 Continue with two JV drilling rigs Continue recompletion program 11

Financial Results Kyle McCuen VP, Interim CFO and Treasurer 12

2Q 17 Financial Highlights $179MM Adjusted EBITDAX Exceeded expectations with adjusted EPS of ($0.10) Executed open market debt repurchases $157MM face value ($125MM: 2020 Notes, $32MM: 2023 Notes) for $118MM cash in June and July Weighted average price of ~75% of face value and ~20% YTM ~$10MM annualized cash interest savings Maintained RBL value and extended covenant relief Increased commodity price protection with additional hedges Maintain strong liquidity of ~$1.1B Note: See the Second Quarter 2017 Financial and Operational Reporting Package, available at epenergy.com, for the Company s non-gaap reconciliations and definitions. 13

Hedge Program Summary Hedge Summary 2017 2018 2019 Oil volumes (MMBbls)¹ 5.0 8.9 - Average floor price ($/Bbl) $ 60.34 $ 60.00 - Natural Gas volumes (TBtu) 17.5 25.6 7.3 Average floor price ($/MMBtu) $ 3.28 $ 3.04 $ 2.97 Added 2019 natural gas price support Remaining 2017: Oil: ~60%² estimated oil floored at $60.34 (retain additional upside) Natural Gas: ~75%² estimated natural gas floored at $3.28 2018: Oil: ~52%² estimated oil floored at $60 (retain additional upside) Natural Gas: ~55%² estimated natural gas floored at $3.04 Note: Hedge positions are as of August 1, 2017 (Contract months: July 2017 Forward). For further details on the Company s derivative program, see EP Energy Corporation s Form 10-Q for the quarter ended June 30, 2017 ¹ Includes 2017 WTI three way collars of 4.5 MMBbls and 2018 WTI three way collars of 8.9 MMBbls ² Percent hedged based on midpoint of 2017 guidance 14

Updated 2017 Outlook Previous Guidance Current Guidance Oil production (MBbls/d) 45 49 46 48 Total production (MBoe/d) 75 82 80 85 Oil & Gas capital ($MM) 1 Wolfcamp $245 $325 $250 $300 Eagle Ford 260 270 ~200 Altamont 125 135 ~100 Total capital program ($MM) $630 $730 $550 $600 Gross well completions Wolfcamp 2 90 105 80 100 Eagle Ford ~60 ~50 Altamont 3 ~25 ~30 Total 175 190 160 180 Lease operating expense ($/Boe) $5.85 $6.35 $5.50 $5.85 Adjusted general and administration expenses ($/Boe) 4 $3.15 $3.40 $2.90 $3.00 Transportation and commodity purchases ($/Boe) $3.90 $4.50 $3.85 $4.25 Taxes, other than income ($/Boe) 5 $2.70 $2.85 $2.10 $2.25 Maintained full year oil production guidance while lowering expected completion activities and capital expenditures Expect Wolfcamp production growth 2H 17 Improved adjusted cash costs outlook as a result of increased operational efficiencies Reduced maintenance capital to < $600MM DD&A ($/Boe) $16 $17 $16 $17 1 Includes 20 25 percent non-drill capital 2 Includes completions which are within the drilling joint venture with 40 percent of total well cost to EP Energy 3 Includes completions which are within the drilling joint ventures in the Altamont program 4 See the Second Quarter 2017 Financial and Operational Reporting Package, available at epenergy.com, for the Company s non-gaap reconciliations and definitions 5 Severance taxes based off of current strip prices 15

Investor Update August 3, 2017

Appendix 17

Altamont Drilling JV Improves Returns & Financial Flexibility Completed JV Drilling Program Agreement with Tesoro in May 17 Enhances program economics Creates capex allocation options with capital carry Includes <5% of existing inventory in Altamont program Implies acreage value of ~$10,000 to ~$20,000 per acre Summary Terms 60 well program TSO earns 50% of EPE s WI EPE operates all wells EPE s share of capital $64MM First wells online in July 17 18