Independent energy exploration company EPL Oil & Gas, Inc. recently announced that it will be offering 8.25% senior unsecured notes in a private placement of $250 million, due in 2018. The company plans to offer these notes to qualified institutional buyers.
Net proceeds from the offering will be deposited by the company into escrow to complete its pending Hilcorp acquisition. Earlier in September, EPL agreed to acquire certain shallow water Gulf of Mexico (GoM) assets from privately-held Hilcorp Energy GOM Holdings LLC.
EPL will fund the purchase value for the above acquisition upon realization of net proceeds from escrow.
If the Hilcorp deal is terminated due to any reason, then EPL will use the escrowed funds to buy back the senior notes along with accrued interest up to the redemption date.
EPL reported second quarter 2012 adjusted earnings per share of 52 cents on August 2, beating the Zacks Consensus Estimate of 46 cents by 13% and the year-ago profit of 33 cents by 58%. Revenues of $99.3 million were up 7% year over year from $92.8 million, surpassing the Zacks Consensus Estimate of $97.0 million.
The company ended second quarter of 2012 with cash and cash equivalents of $60.8 million and long-term borrowings of $204.7 million.
EPL, based in New Orleans and Houston, is a GoM-focused upstream player that has attractive value characteristics and remains well positioned to maintain a strong earnings growth trajectory in the near- to medium-term. It is engaged in the exploration and development of crude oil and natural gas resources in the U.S. GoM shelf off the coast of Louisiana.
EPL – which counts U.S. supermajor ConocoPhillips (COP - Free Report) as one of its major customers – currently holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.
Based on the success of the company’s acquire-and-exploit policy, we believe earnings growth will be strong for EPL over the next couple of years.