'Lack of Exploratory Drilling' Yields Low Reserve Replacement for EPL
Energy Partners Ltd's proved reserves at year end 2007 stood at 28.1 million barrels of oil and 103.1 billion cubic feet of natural gas, or 45.3 million Boe. EPL's proved reserves at year-end 2007 were 62% oil and 38% natural gas, and 84% were classified as proved developed. EPL added 2.5 million Boe from its exploration and development program, and acquired an additional 0.7 million Boe mainly from the purchase of an additional interest in the Company's Mississippi Canyon blocks 248 (the Raton discovery), 204, and 292 leases in the deepwater GOM.
The Company recorded 5.3 million Boe in negative revisions to its proved reserves in 2007, comprised of 4.1 million Boe of negative revisions for fields mainly in the Western offshore area that were impaired during 2007. EPL produced 8.8 million Boe during 2007. The Company sold 2.1 million Boe in the sale of substantially all of its onshore South Louisiana asset base in June of 2007. The Company's total expenditures for finding and development in 2007 were $307.7 million, or $317.3 million including acquisition expenditures.
The present value of the future net cash flows before income taxes of the Company's estimated proved oil and natural gas reserves at the end of 2007 using a discount rate of 10% was approximately $1.5 billion, a $0.3 billion increase over the value reported last year. The 2007 value was determined based on period-end prices of $94.76 per barrel of oil and $6.98 per Mcf for natural gas.
All of the Company's proved reserve figures are based upon third party engineering estimates prepared by Netherland, Sewell & Associates, Inc. and Ryder Scott Company, L.P.
Bachmann continued, "Our lack of exploratory drilling success in 2007 was clearly the reason for our low reserve replacement from the drill bit. Our negative revisions, mainly related to the impairment of properties outside our renewed core focus areas, led to all-in reserve adds that were less than our annual production. We are undertaking a comprehensive risk assessment study, which has been commissioned with an outside firm, to look at our past performance, and more importantly, to take a critical look at our current exploratory inventory and how to best execute on it. Nonetheless, our current proved reserve base experienced an increase of almost $300 million in present value compared to the prior year-end value. Our reserve base now has a higher concentration of oil reserves than we have had in the past five years."
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