Wednesday, January 15, 2014

The Ghost of El Paso Set to IPO this Week

This week, the former El Paso E&P will resurface in the public markets as EP Energy.  The estimated price of the IPO should value the equity around $6.2 billion.  It was only a year and a half ago that Apollo took El Paso E&P private following Kinder Morgan's acquisition of El Paso and the subsequent sale of its E&P business.

What does this mean for Haynesville fans?  Nothing really.  EP is focusing on west Texas and the Rockies, completely ignoring the Haynesville, even though it remains the company's largest producer of natural gas (148 Bcf of 243 Bcf in Q3 2013 - see table below).  In Q3 2013, the company only planned to spend $1 million of its $466 million capital budget on the Haynesville.  Where's the love?  Don't answer that -  I already know.

The economics for the Haynesville are pretty strong based on the company's numbers (below), but they know that Wall Street will flay them if they focus on anything other than liquids, especially as they are about to IPO.  But hey, a 47% IRR - that's very strong, especially compared to the company's other plays.


Anonymous said...

They only have 97 drilling locations in the Haynesville? That is a very small number, especially compared to their other locations.


Robert Hutchinson said...

Yeah, I'm not so sure about that. By my count they have 121 completed Haynesville wells in Louisiana. Maybe they dropped a zero when putting the chart together. Further proof that the Haynesville is an afterthought at EP?