EPL Underscores Current Operations, Starts Up Deepwater GOM Production
EPL has provided an update on its production operations, including the commencement of the Company's first deepwater Gulf of Mexico ("GOM") production, the Raton gas well in Mississippi Canyon ("MC") 248.
The Company reported its current daily production is approximately 12,500 barrels of oil equivalent ("Boe") per day, which represents 76% of pre-storm production levels. Restoring the majority of the Company's remaining shut-in production is largely dependent upon the acceptance of production by two third party pipelines damaged during the 2008 hurricane season. The current schedule for the restoration of an additional 1,600 Boe per day net to EPL is dependent on its acceptance into the Bluewater pipeline system, which has been estimated by the third party pipeline operator to occur before the end of January 2009.
The current schedule for the restoration of approximately 2,500 Boe per day net to EPL is dependent on its acceptance into the Discovery pipeline system, which has been estimated by the third party pipeline operator to begin within the next few weeks. The commencement of this production should bring the Company's total production slightly above pre-storm levels to approximately 16,600 Boe per day. Additionally, the Company has 1,750 Boe per day of non-operated shut-in production which is partner dependent; the exact timing of restoration of these volumes is not yet certain. However, based on current estimates by the operators of these fields, this production is expected to ramp up within the first half of 2009.
The Company estimates its fourth quarter 2008 production averaged between 8,500 and 9,000 Boe per day, versus the guidance range of 9,000 to 11,000 Boe per day. The lower-than-expected production was due to delays by the two previously mentioned third party pipelines, both of which were previously scheduled to be on line during the month of December 2008. The Company has business interruption insurance coverage that began in late November 2008 for production dependent upon the Discovery pipeline system.
The Company also reported that the Raton well, a deepwater GOM gas discovery in MC 248, commenced production late fourth quarter. This is the first deepwater GOM production for the Company since it began its deepwater program in 2006. The Raton well has been ramped up to a gross current rate of 32 million cubic feet per day and 440 barrels of condensate per day. EPL owns a 33% working interest in this well.
Richard A. Bachmann, EPL's Chairman and CEO commented, "While our fourth quarter production was significantly impacted by third-party pipeline and partner delays, we now have clearer visibility on our volumes returning to pre-storm and then higher levels in the very near future. Our production is also being positively impacted by the initiation of production from Raton, our first deepwater field, and with the restoration of the Bluewater pipeline system we should see benefit from the prior year success at South Marsh Island 79. As our revenues rise from the restoration of production, we plan to strengthen our balance sheet. We will not address allocation of capital for drilling operations until we see lower drilling and service costs that are more in line with the reduction in commodity prices, which we continue to monitor. We will also continue to focus on controlling our cash operating costs, with further cost reductions planned for 2009."
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