EPL Announces First Quarter 2007 Results

Energy Partners, Ltd. ("EPL” or the "Company”) (NYSE:EPL) today reported financial and operational results for the first quarter of 2007. The Company also announced a recent discovery on the Gulf of Mexico Shelf (Shelf) in West Cameron 252. Financial Results Net income was $3.7 million for the first quarter of 2007 compared to $14.8 million for the first quarter of 2006. Net income per diluted share for the first quarter 2007 was $0.09 compared to $0.37 per diluted share in the same quarter a year ago. Revenue for the first quarter of 2007 was $108.5 million, essentially flat with first quarter 2006 revenues of $109.2 million. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expenses, was $71.2 million versus $92.9 million in the first quarter last year. (See reconciliation of discretionary cash flow schedule in the tables.) Cash flow from operating activities in the first quarter of 2007 was $113.8 million compared with $63.9 million in the same quarter a year ago. The first quarter of 2007 benefited from a 13% increase in production volumes versus the first quarter of 2006. Benefits were also realized in the quarter from the settlement of insurance claims related to Hurricanes Katrina and Rita. Insurance collections in the first quarter of 2007 were $92.9 million, compared to $58.3 million of insurance receivables recorded at the end of year 2006. The benefits of increased production and gains resulting from insurance collections were reduced by decreased commodity prices and increased expenses, primarily attributable to $8.8 million of legal and financial advisory fees related to the exploration of strategic alternatives and the recently concluded equity self-tender offer and related tender offer for the Company’s senior notes due 2010. Lease operating expenses were also higher than the same period a year ago, mainly due to additional expenses associated with production from new field discoveries, non-routine workover expenses, costs associated with pipeline repairs at its East Bay field, and hurricane related inspections not covered by insurance. Production for the first quarter of 2007 averaged 25,982 barrels of oil equivalent (Boe) per day, up 13% from 22,991 Boe per day in the first quarter of 2006. Natural gas production in the first quarter of 2007 averaged 100.4 million cubic feet (Mmcf) per day, a 6% rise from 94.8 Mmcf per day in the first quarter of 2006. Oil production in the most recent quarter averaged 9,244 barrels per day, a 29% rise from the average of 7,185 barrels per day in the first quarter of last year. First quarter 2007 production volumes were up compared to the first quarter of 2006 due to new wells that came on line and essentially all production being restored following the disruptions related to the 2005 storm season. Oil price realizations for the first quarter of 2007 averaged $53.31 per barrel, a 10% decrease from $59.16 per barrel in the same period a year ago. First quarter natural gas price realizations averaged $7.09 per thousand cubic feet (Mcf), decreasing 15% from $8.30 per Mcf in the first quarter of 2006. All commodity prices are stated net of hedging impact. The Company maintains a complete and regularly updated schedule of hedging positions under "Hedging” in the Investor Relations section of the Company’s web site, www.eplweb.com. During the quarter, capital expenditures for exploration and development activities totaled $103.2 million. As of March 31, 2007, the Company had cash on hand of $33.9 million, total debt of $315.0 million, and a debt to total capitalization ratio of 45%, and a net debt to total capitalization ratio of 41%. Completion of Concurrent Tenders and Financing On March 12, 2007, the Company announced the conclusion of its strategic alternatives process. The Company stated that the Board, with advice from the Company’s financial advisors and management, determined to continue with the execution of the Company’s strategic plan, augmented by an equity self-tender offer and related financing transactions and the divestment of selected properties. In late April, EPL privately placed $450 million of Senior Unsecured Notes at par and secured a new revolving credit facility. Proceeds were used to fund the purchase of 8,700,000 shares at $23.00 per share in its equity self-tender offer, the repurchase of approximately 96% of its senior notes due 2010, and the repayment of its then existing revolving credit facility. The Company stated it is actively marketing selected non-strategic properties for divestiture to reduce its post tender offer debt, with an expected close in the third quarter of 2007. Additionally, based on its increased financial leverage, the Company has initiated a comprehensive hedging program designed to mitigate commodity price risk. Richard A. Bachmann, EPL’s Chairman and CEO, commented, "We are very excited to have the corporate actions initiated in mid-March behind us, with only the asset divesture remaining to be wrapped up sometime in the third quarter of this year. I’m pleased to report that through all of the turmoil of the last two years, we have maintained the staff that brought us our previous successes. We can now turn our full attention to our core business, with renewed focus and determination to create value for our shareholders.” Recent Shelf Discovery The Company today announced a recent discovery on the Shelf, the West Cameron 252 #1 well. The moderate risk, moderate potential well, drilled to a total depth of 8,299 feet, encountered high quality natural gas pay in a single interval. The well is currently anticipated to initiate production in 2008, with an option to accelerate first production currently under evaluation. EPL, the operator, holds a 75% working interest in the well and Mariner Energy, Inc. (NYSE:ME) holds the remaining 25%. Current Operations Onshore The Company has one moderate risk, high potential exploratory well underway, called Longhorn, located onshore in Terrebonne Parish in south Louisiana. One additional onshore exploratory well, the moderate risk, moderate potential Goldfish prospect located in Jefferson Parish in south Louisiana, is expected to spud in the second quarter. Shelf The Company is currently drilling a moderate risk, moderate potential well located on the Shelf in West Cameron 312. For the remainder of the second quarter, exploration activity on the Shelf will focus within the South Timbalier (ST) area where the Company has historically had a strong track record of successes. Operations will include the planned spud of two wells, a moderate risk, high potential prospect, called Cap Rock, located in 60% EPL owned ST 41 and a moderate risk, moderate potential prospect, called Chimney Rock, located in 100% EPL owned ST 26. Additionally, EPL expects first production from the 100% EPL owned ST 46 discovery area in mid-second quarter from the recently completed #4 acceleration well. Conference Call Information EPL has scheduled a conference call to review first quarter 2007 results and second quarter guidance this morning, May 3, 2007 at 8:00 a.m. central time. The Company will also post the second quarter guidance as covered during the call along with full year guidance on the Company’s website in the Investor Relations section. To participate in the EPL conference call, callers in the United States and Canada can dial (877) 612-5303 and international callers can dial (706) 634-0487. The Conference I.D. for callers is 6665956. The call will be available for replay beginning two hours after the call is completed through midnight of May 8, 2007. For callers in the United States and Canada, the toll-free number for the replay is (800) 642-1687. For international callers the number is (706) 645-9291. The Conference I.D. for all callers to access the replay is 6665956. The conference call will be webcast live as well as for on-demand listening at the Company's web site, www.eplweb.com. Listeners may access the call through the "Conference Calls” link in the Investor Relations section of the site. The call will also be available through the CCBN Investor Network. Founded in 1998, EPL is an independent oil and natural gas exploration and production company based in New Orleans, Louisiana. The Company’s operations are focused along the U. S. Gulf Coast, both onshore in south Louisiana and offshore in the Gulf of Mexico. Forward-Looking Statements This press release may contain forward-looking information and statements regarding EPL. Any statements included in this press release that address activities, events or developments that EPL expects, believes or anticipates will or may occur in the future are forward-looking statements. These include statements regarding: reserve and production estimates; oil and natural gas prices; the impact of derivative positions; production expense estimates; cash flow estimates; future financial performance; planned capital expenditures; and other matters that are discussed in EPL's filings with the Securities and Exchange Commission. These statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties, and other factors that may cause actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Please refer to EPL's filings with the SEC, including Form 10-K for the year ended December 31, 2006 and Form 10-Q as of March 31, 2007 to be filed shortly, for a discussion of these risks. This announcement does not constitute an offer or invitation to purchase nor a solicitation of an offer to buy or sell any securities of EPL. Additional Information and Where to Find It. Security holders may obtain information regarding the Company from EPL's website at www.eplweb.com, from the Securities and Exchange Commission's website at www.sec.gov, or by directing a request to: Energy Partners, Ltd. 201 St. Charles Avenue, Suite 3400, New Orleans, Louisiana 70170, Attn: Secretary, (504) 569-1875. ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)     Three Months Ended   March 31, 2007  2006  Revenues: Oil and natural gas $ 108,402  $ 109,124  Other 61  69  108,463  109,193    Costs and expenses: Lease operating 16,749  12,365  Transportation expense 459  248  Taxes, other than on earnings 2,870  2,995  Exploration expenditures, dry hole costs and impairments 21,801  19,596  Depreciation, depletion and amortization 47,920  46,052  Accretion expense 1,100  1,093  General and administrative 22,395  12,456  Gain on insurance recoveries (8,084) -  Other -  (925) Total costs and expenses 105,210  93,880    Business interruption recovery 9,084  12,689  Income from operations 12,337  28,002    Other income (expense): Interest income 180  279  Interest expense (6,757) (5,084) (6,577) (4,805)     Income before income taxes 5,760  23,197  Income taxes (2,064) (8,394)     Net income 3,696  14,803      Basic earnings per share $ 0.09  $ 0.39    Diluted earnings per share $ 0.09  $ 0.37    Weighted average common shares used in computing earnings per share:   Basic 40,157  38,028  Incremental common shares 326  2,340  Diluted 40,483  40,368  ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) (Unaudited)   Three Months Ended March 31, 2007  2006  Cash flows from operating activities: Net income $ 3,696  $ 14,803  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 49,021  47,145  Non-cash compensation 2,139  2,115  Deferred income taxes 2,063  8,677  Exploration expenditures 16,663  13,968  Amortization of deferred financing costs 234  249  Gain on insurance recoveries (8,084) -  Other 379  294  Changes in operating assets and liabilities: Trade accounts receivable 3,818  11,381  Other receivables 56,006  (12,603) Prepaid expenses (112) 2,124  Other assets (152) 850  Accounts payable and accrued expenses (11,843) (25,030) Other liabilities (38) (103)   Net cash provided by operating activities $ 113,790  $ 63,870    Reconciliation of discretionary cash flow: Net cash provided by operating activities 113,790  63,870  Changes in working capital (47,679) 23,381  Non-cash exploration expenditures (16,663) (13,968) Total exploration expenditures 21,801  19,596  Discretionary cash flow $ 71,249  $ 92,879    The table above reconciles discretionary cash flow to net cash provided by operating activities. Discretionary cash flow is defined as cash flow from operations before changes in working capital and exploration expenditures. Discretionary cash flow is widely accepted as a financial indicator of an oil and natural gas company's ability to generate cash which is used to internally fund exploration and development activities, pay dividends and service debt. Discretionary cash flow is presented based on management's belief that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. Many investors use the published research of these analysts in making their investment decisions. Discretionary cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities, as defined by GAAP, or as a measure of liquidity, or an alternative to net income. Investors should be cautioned that discretionary cash flow as reported by us may not be comparable in all instances to discretionary cash flow as reported by other companies. ENERGY PARTNERS, LTD. SELECTED PRODUCTION, PRICING AND OPERATIONAL STATISTICS (Unaudited)   Three Months Ended March 31, 2007  2006    PRODUCTION AND PRICING Net Production (per day): Oil (Bbls) 9,244  7,185  Natural gas (Mcf) 100,427  94,833  Total (Boe) 25,982  22,991  Oil and Natural Gas Revenues (in thousands): Oil $ 44,348  $ 38,253  Natural gas 64,054  70,871  Total 108,402  109,124  Average Sales Prices (1): Oil (per Bbl) $ 53.31  $ 59.16  Natural gas (per Mcf) 7.09  8.30  Average (per Boe) 46.36  52.74    Impact of hedging: Oil (per Bbl) $ -  $ -  Natural gas (per Mcf) -  (0.11)   OPERATIONAL STATISTICS Average Costs (per Boe): Lease operating expense $ 7.16  $ 5.98  Taxes, other than on earnings 1.23  1.45  Depreciation, depletion and amortization 20.49  22.26  ENERGY PARTNERS, LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)   March 31, December 31, 2007  2006  (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 33,912  $ 3,214  Trade accounts receivable 70,314  74,132  Other receivables 2,263  58,269  Deferred tax asset 1,499  1,387  Prepaid expenses 3,682  3,570  Total current assets 111,670  140,572    Property and equipment, at cost under the successful efforts method of accounting for oil and natural gas properties 1,608,002  1,527,304  Less accumulated depreciation, depletion and amortization (739,267) (680,845) Net property and equipment 868,735  846,459    Other assets 13,181  13,029  Deferred financing costs -- net of accumulated amortization 3,551  3,785  $ 997,137  $ 1,003,845    LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 34,981  $ 47,154  Accrued expenses 133,156  133,198  Fair value of commodity derivative instruments 2,284  1,552  Total current liabilities 170,421  181,904    Long-term debt 315,000  317,000  Deferred income taxes 64,363  62,451  Asset retirement obligation 68,226  68,767  Other 1,584  1,453  619,594  631,575    Stockholders’ equity: Preferred stock, $1 par value. Authorized 1,700,000 shares; no shares issued and outstanding -  -  Common stock, par value $0.01 per share. Authorized 50,000,000 shares; issued and outstanding: 2007 – 43,840,166 shares; 2006 – 42,501,726 shares   439  425  Additional paid-in capital 367,345  365,313  Accumulated other comprehensive loss (1,464) (994) Retained earnings 68,663  64,966  Treasury stock, at cost. 2007 -- 3,480,181 shares; 2006 -- 3,479,814 shares (57,440) (57,440) Total stockholders’ equity 377,543  372,270  Commitments and contingencies     $ 997,137  $ 1,003,845