Energy Partners Reports 3Q07 Loss

Energy Partners announced financial results for the third quarter of 2007. The Company also announced that it has recently drilled two discovery wells, including one on the Gulf of Mexico ("GOM") Shelf in West Cameron 141 and one located onshore south Louisiana in Terrebonne Parish.

EPL reported a net loss to common stockholders of $4.0 million for the third quarter of 2007 compared to a net loss to common stockholders of $25.2 million for the third quarter of 2006. The net loss per diluted share for the third quarter 2007 was $0.12 compared to a net loss per diluted share of $0.66 in the same quarter a year ago.

The Company said a large part of the net loss for the third quarter of 2007 was attributed to $7.4 million of pre-tax, non-cash costs associated with a property impairment at East Cameron 196, a small field located in the Company's Western offshore area, which is near the end of its economic life. This non-cash cost reduced net income on an after-tax basis by $4.9 million or $0.15 per share. The loss in the third quarter of 2006 was primarily attributed to merger and acquisition related expenses.

Revenue for the third quarter of 2007 was $110.4 million, a 3% increase over third quarter 2006 revenues of $107.5 million. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expense was $66.5 million, nearly triple the discretionary cash flow of $22.7 million reported in the third quarter last year. (See reconciliation of discretionary cash flow schedule in the tables.) Cash flow from operating activities in the third quarter of 2007 was $62.5 million versus $10.5 million in the same quarter a year ago.

Compared to the same period a year ago, EPL benefited from record high oil prices and strong natural gas prices during the third quarter of 2007, as well as a significant decrease in general and administrative expense and depreciation, depletion and amortization expense. These benefits were offset by an increase in interest expense and lease operating expense ("Loe"). The increase in Loe to $19.0 million in the third quarter of 2007 from $15.2 million in the third quarter of 2006 was primarily due to non-budgeted repair and workover costs totaling $2.9 million.

Production for the third quarter of 2007 averaged 23,701 barrels of oil equivalent ("Boe") per day, down from 25,421 Boe per day in the third quarter of 2006. The decrease in third quarter 2007 production volumes was due primarily to the sale of substantially all of the Company's onshore south Louisiana gas producing assets, which closed in late second quarter 2007. Natural gas production in the third quarter of 2007 averaged 92.6 million cubic feet ("Mmcf") per day, compared to 104.0 Mmcf per day in the third quarter of 2006. Oil production in the most recent quarter averaged 8,271 barrels per day, a 2% rise from the average of 8,092 barrels per day in the third quarter of 2006.

Oil price realizations for the third quarter of 2007 reached a record high, averaging $70.89 per barrel, which was an 8% increase from the prior record of $65.57 per barrel in the same period a year ago. Natural gas price realizations in the quarter averaged $6.62 per thousand cubic feet ("Mcf"), up from $6.12 per Mcf realized during the third quarter of 2006. The Company, which discontinued cash flow hedge accounting in the second quarter of 2007, recorded a loss on its derivative instruments of $0.2 million during the third quarter.

The Company announced a new discovery on the Shelf, the West Cameron 141 #1 well. The moderate risk, moderate potential well drilled to a total depth of 10,370 feet and encountered high quality natural gas pay in its objective sand. The #1 well is expected to be on line in the second quarter of 2008. EPL holds a 100% working interest in this well. The Company also announced a new discovery onshore in south Louisiana. The moderate risk, moderate potential exploratory well, Tiger Bait, located in Terrebonne Parish, was drilled to a total depth of 14,448 feet and encountered pay in a single interval believed to be oil bearing. The well is expected to be on line in early 2008. The Company holds a 40% working interest in this well.

The Company further announced that a moderate risk, moderate potential Shelf exploratory well, South Marsh Island 247, in which the Company held a 100% working interest, was determined to be a dry hole. The Company recognized dry hole expense of $9.9 million in the third quarter of 2007 in connection with the well.

For the year-to-date, the Company has announced seven discoveries including one onshore discovery in Terrebonne Parish in south Louisiana and six on the Shelf at South Timbalier 26, South Timbalier 41, West Cameron 252, West Cameron 141, and two discoveries in the Eugene Island 311/312 area. Additionally, at EPL's 100% owned South Timbalier 46 field, the Company is continuing to produce the #3 (A-1) well in one of the four sands discovered in the deep hole section, with high quality gas and associated condensate being sold directly into the field's gas sales line.

EPL has been awarded one of the eight leases on which it was high bidder at the MMS Central Lease Sale held in October of this year. The lease covers South Timbalier 57. As previously announced, EPL's eight high bids, located on the Shelf and in the deepwater GOM, totaled $19.2 million to its interest.

The Company is currently drilling three high potential exploratory wells, including two on the Shelf and one onshore in south Louisiana. On the Shelf, the Company is drilling the moderate risk, high potential South Timbalier 214 #2 well and the moderate risk, high potential Eugene Island 21 #1 well. The Company is also currently drilling a high risk, high potential well called La Posada in Vermilion Parish. In addition, the Company said the development well work is completed on the Raton discovery well in Mississippi Canyon 248 located in the deepwater GOM. First production from this deepwater well is expected in early 2008, and the Company has increased its working interest from 25% to 33% in the discovery area.

Richard A. Bachmann commented, "We are pleased with our two most recent drilling successes, and are excited about the three high potential wells currently drilling. We are also very pleased that the development work on our first deepwater field is completed and is still projected to be on line in early 2008. In addition, we are awaiting word from the MMS about the awarding of the remaining leases on which we were the high bidder during the long-awaited recent central Gulf lease sale. Later this month our Board will be reviewing our 2007 capital budget and finalizing our 2008 plans, including the capital budget. Looking ahead to 2008, our spending plans will include an exciting slate of exploratory wells from our existing portfolio. Since we have identified prospects on all of the leases on which we were the high bidder in the recent lease sale, some of them are likely to enhance our 2008 program."

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