Energy Partners, Ltd. has provided an operational update on its production and drilling operations.
As previously reported, the vast majority of EPL's producing properties, which are located in the Gulf of Mexico have suffered minor damage as a result of Hurricanes Gustav and Ike. Current daily production is approximately 40% of pre-storm production levels.
Restoring the Company's remaining production is largely dependent upon the acceptance of production by third party pipelines and processing facilities damaged during the hurricanes. As a result of these temporary shut-ins, EPL estimates its third quarter production will average between 12,000 to 12,500 barrels of oil equivalent per day. The exact timing of these third party repairs remains unknown at this time, but the Company expects the vast majority, if not all, of the production to be restored within the fourth quarter of this year. EPL will provide estimates on fourth quarter and updated full year 2008 production in its third quarter earnings release.
EPL maintains insurance coverage for property damage due to windstorms with a per-storm deductible of $10 million. As previously reported, the Company believes that the repair costs associated with damage to EPL properties from both Hurricanes Gustav and Ike will each be less than the per-storm deductibles. Additionally, EPL maintains business interruption insurance on its South Timbalier ("ST") 41, 42 and 46 properties, although the Company at this time does not anticipate making a claim as repairs are expected to be completed during the no claim period provided for under the policy.
EPL's drilling program resumed shortly after Hurricane Ike's landfall. The Company announced today that the ST 26 F-32 development well has been completed and is expected to be on line shortly. Additionally, the Company's East Bay development program has drilled two more successful sidetracks with over 100 feet of net pay in each. EPL owns a 100% working interest in all three of these wells. To date, EPL has a 92% success rate in its 2008 drilling program with 12 successful wells on the GOM Shelf. This includes three wells in Bay Marchand, three in ST 26, and six in East Bay. For the remainder of the year, the Company plans to continue executing additional development opportunities in its East Bay field, and plans to resume exploration drilling late in the fourth quarter of this year.
EPL is currently drilling another sidetrack well in its East Bay field and conducting a rig workover at Eugene Island 277. The Company has completed its South Marsh Island 79 #E-1 well, a 100% EPL owned prior year gas discovery expected to commence production once a third party pipeline is repaired. The Company also reported that the production schedule for the Raton well, a deepwater GOM gas discovery in Mississippi Canyon ("MC") 248, was uninterrupted by the storms and should commence production by late fourth quarter this year or early next year. Additionally, the MC 292 #5 Raton South well in the deepwater GOM has been successfully sidetracked. This appraisal sidetrack well found apparent oil pay updip of the original well location.
EPL also commented that the Company has no natural gas hedges and only minimal crude oil financially settled hedges in place during this storm season. EPL also said that it has no counter-party exposure with Lehman Brothers.
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