EP Energy Corporation (EPE) announced it has, through a subsidiary, entered into a drilling joint venture with private capital investor, Wolfcamp Drillco Operating L.P. (Investor), to fund future oil and natural gas development in its Wolfcamp program.
Drilling Joint Venture highlights
Up to a 150 well program in two 75 well tranches
Investor funds approximately $450MM for 60 percent of drilling, completion and equipping costs over the life of the program
Investor earns 50 percent working interest in each farmout well in the completed Wolfcamp interval
Significantly enhances program economics with well-level IRRs of more than 80 percent
Further illuminates Wolfcamp acreage value of approximately $20,000 per acre
EP Energy operates all wells in the program
"We are pleased to announce our Permian drilling joint venture, which will enable us to accelerate the development of our largest strategic asset in a balance sheet friendly manner," said Brent Smolik, chairman, president, and chief executive officer of EP Energy Corporation. "During the past year, we significantly increased the value of our Wolfcamp asset with improved well performance, a lower cost structure and reduced royalty rates. This new capital commitment further improves and illuminates the acreage value of our Wolfcamp program."
The Investor is participating in the development of an up to 150 well program in two separate 75 well tranches in areas of the company's acreage, including Reagan and Crockett Counties.
The Investor will fund 60 percent of the drilling, completion and equipping costs in exchange for a 50 percent working interest in the joint venture wells. Once the Investor achieves a 12 percent internal rate of return on its invested capital in each tranche, its working interest will revert to 15 percent. EP Energy will retain operational control of the joint venture assets. The first wells under the joint venture began production in January 2017.
Wolfcamp Drillco Operating L.P. is managed by, and its equity is owned by, affiliates of Apollo Global Management LLC, affiliates, of which beneficially own approximately 45 percent of EP Energy's common stock and have representatives on its board of directors. The transaction was approved by the disinterested members of the EP Energy's board of directors.