Energy Partners Ltd has entered into a definitive agreement to sell two non-operated properties located in its Western offshore area for $16.2 million in cash.
The announced sale represents less than 1% of its proved reserves as of December 31, 2007 and a recent average production rate net to the Company of less than 2% of fourth quarter average production. The transaction is expected to close in late March or early April and is subject to customary closing conditions and adjustments from the effective date.
Bachmann concluded, "We believe the best near-term plan for the Company is to focus on exploitation and exploration in our core areas in the South Timbalier area and our East Bay field, and we have positioned our technical staff accordingly. Based on that narrowed focus, we are in the process of right sizing our Company to match a proved asset base that is concentrated in these areas. This right sizing is intended to reduce our cash costs. We are targeting a 20% reduction in our costs, mainly through reductions in general and administrative (G&A) costs and lease operating expenses (LOE). This process is underway and the major reductions in our G&A are expected to be implemented in the first half of this year, with LOE reductions to occur throughout the year.
"The Company will continue to look at property sales as a part of our strategy to pay down debt, with likely sales candidates to come from outside of our core focus areas, and transactions likely to be similar to the one we announced today in the Western offshore area.
"As I discussed earlier, we are undergoing an exhaustive look at our risking of drilling opportunities. We have retained Rose & Associates, a leading consulting firm on risk assessment, to lead this effort with our technical staff. While our risk assessment exercise will focus on our past performance, it will more importantly assess our portfolio of prospects that span the Shelf and deepwater GOM. The outcome of that study will focus the future direction of our capital spending in these areas.
"We are focused on growth through exploring and acquiring additional acreage and reserves within our core Central and Eastern offshore areas, with a clear preference to opportunities that fall within these core focus areas and lead to expansion of our reserve base. We are also considering other basins for investment opportunities that could lengthen our reserve life and provide a more predictable production base to support our Shelf and deepwater GOM pursuits. The actions we have detailed today provide us with a clear path to move forward that is intended to lead to future growth."
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