Monday, September 16, 2013

Fracking and Shale Oil and Gas IPO Coming from EP Energy

There is another emerging oil and gas company that now wants to come public. EP Energy Corporation has filed its paperwork with the SEC to come public via an initial public offering. Because this is a private equity-backed IPO we are under the impression that the “up to $100 million” is merely a number used for its IPO paperwork that may get expanded considerably before the formal IPO.

EP Energy is a Houston-based independent exploration and production company which is engaged in the acquisition and development of unconventional onshore oil and natural gas properties. Its focus for profits comes from the development of low-risk drilling inventory located in four core areas. These are geographically located in the Eagle Ford Shale in South Texas, the Wolfcamp Shale in the Permian Basin in West Texas, the Uinta Basin in Utah and also the Haynesville Shale located in North Louisiana.

EP Energy’s management team has a proven track record dealing with unconventional oil and natural gas assets. It even says, “The majority of our senior management team has worked together for over a decade and the team has significant experience at prominent oil and gas companies that have included El Paso Corporation, ConocoPhillips and Burlington Resources.”

With 501 million barrels of proved reserves and some 24 years worth of life left to its wells, this is one oil and gas IPO that energy investors may focus on closely. EP Energy will remain a “controlled company” under the NYSE listing rules because the group consisting of its sponsors is made up of affiliates of Apollo Global Management LLC (NYSE: APO), Riverstone Holdings LLC, Access Industries and Korea National Oil Corporation. We find it interesting that no underwriters were formally named in the filing.

The company’s financial statements said”

In our core areas, we have identified in excess of 5,200 drilling locations, of which approximately 96% are oil wells. At current activity levels, this represents approximately 24 years of drilling inventory. As of June 30, 2013, we had proved reserves of 501 MMBoe (57% oil and 66% liquids) and for the three months ended June 30, 2013, we had average net daily production of 93,674 Boe/d (37% oil and 46% liquids)… For the three months ended June 30, 2013, our average net daily production was 34,944 Boe/d, representing growth of 115% over the same period in 2012. As of June 30, 2013, we had five rigs running and plan to drill 126 wells in 2013 (of which 67 have been drilled through June 30, 2013), representing 58% of our total wells planned in 2013. For the six months ended June 30, 2013 our average cost per well was $7.5 million, representing an 11% decline from our average cost per well for the same period in 2012. We expect our average cost per well to continue to decline.


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