Back to top

Image: Bigstock

EP Energy, Wolfcamp Enter into Drilling JV in Permian Basin

Read MoreHide Full Article

Texas-based upstream energy player EP Energy Corporation announced that one of its subsidiaries has teamed up with private equity entity Wolfcamp Drillco Operating L.P. to fund future oil and gas development for EP Energy’s Wolfcamp program in the Permian basin.

The joint venture has chalked out a drilling program covering 150 wells, in two installments of 75 wells, in EP Energy’s acreage which includes Reagan and Crockett Counties. Operational control of wells in the program will be held by EP Energy. The production under the JV initiated this month.

Wolfcamp Drillco will contribute about 60% or $450million of drilling, completion and equipping costs against a 50% working interest in JV wells. Once Wolfcamp achieves 12% internal rate of return (IRR) on its capital investment, its working interest will regress to 15%. The project has well level IRR of 80% and Wolfcamp acreage value is $20000 per acre. Wolfcamp Drillco Operating L.P. is managed by affiliates of Apollo Global Management LLC which owns 45% of EP Energy's common stock.

This tie up is expected to speed up the development of Wolfcamp asset which is the largest strategic holding for EP Energy Company. Better performance, reduced royalty rates and cost structuring initiatives have helped the company to enhance Wolfcamp's asset value last year. The capital funding of the project has in turn boosted the acreage value of the Wolfcamp program.

EP Energy is a major exploration and production company for oil and natural gas in the United States. Eagle Ford Shale, Wolfcamp Shale, Altamont Field are among the chief assets of the company. The company currently carries a Zacks Rank #3 (Hold).

The company outperformed the Zacks categorized US Oil and Gas Exploration and Production industry over the last three months. During the aforesaid period, shares of EP Energy improved almost 44% while the broader industry gained around 11%.

Some better-ranked players in the industry include Denbury Resources Inc. , Noble Midstream partners and Rice Midstream partners . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Denbury Resources is expected to report year-over-year earnings growth of 450%.

Noble Midstream Partners is expected to report year-over-year growth of 27.39% and 174.98% for revenues and earnings in 2017.

Rice Midstream Partners is expected to report year-over-year growth of 33.01% for revenues in 2017.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017? Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold.Be among the very first to see them >>

Published in