EPL Epl Oil & Gas

Energy Partners, Ltd. ("EPL" or the "Company") (NYSE:EPL) today reported financial and operational results for the second quarter of 2007. The Company also announced another discovery on the Gulf of Mexico Shelf ("Shelf") in the Eugene Island ("EI") 311/312 area, making it the second discovery in this area this year, and the third discovery since drilling began in late 2006. The Company has four exploratory wells drilling and three wells planned to spud before the end of year. Four of seven wells currently drilling or scheduled to drill are high potential. Financial Results The Company reported a net loss to common stockholders of $6.3 million, or $0.18 per diluted share, for the second quarter of 2007 compared to net income available to common stockholders of $12.6 million, or $0.31 per diluted share, for the second quarter of 2006. Results for the second quarter included a pre-tax gain of $7.0 million primarily related to the previously announced sale of substantially all of EPL's onshore South Louisiana assets that closed in mid-June, as well as an unrealized gain of $1.9 million on its derivative instruments. The quarter also included pre-tax costs of $10.8 million associated with the early extinguishment of the Company's 8 3/4% Senior Notes due 2010 and the refinancing of its bank credit facility, which included $3.4 million of non-cash charges. Revenue for the second quarter of 2007 rose to $121.7 million, representing a new record high for the Company. This was a slight increase over the prior record revenue of $121.2 million set in the second quarter of 2006. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expenses, was $70.5 million, compared with $98.5 million in the second quarter of last year. (See reconciliation of discretionary cash flow schedule in the tables.) Cash flow from operating activities in the second quarter of 2007 was $53.5 million compared with $111.1 million in the same quarter a year ago. EPL benefited from strong production volumes and commodity prices during the second quarter of 2007, as well as cash proceeds from its onshore asset divestiture totaling $67.5 million after closing adjustments through June 30, 2007. These benefits were reduced in the quarter by expenses related to the repurchase of its senior notes due 2010 and higher exploration costs. The higher exploration costs were primarily the result of dry hole costs totaling $28.2 million mainly related to three high working interest wells, as well as $7.0 million for the impairment of two small properties that depleted. The Company said depreciation, depletion and amortization ("DD&A") expenses per barrel of oil equivalent ("Boe") trended down to $18.55 per Boe in the second quarter of 2007, representing a significant decrease from the reported first quarter of 2007 DD&A rate of $20.49 per Boe, and a level lower than any reporting period in 2006. Production for the second quarter of 2007 averaged 26,093 Boe per day. Production volumes were within the guidance range provided for the quarter despite the impact of an estimated decrease of 400 Boe per day due to the earlier than expected closing of the sale of its onshore south Louisiana divestiture package on June 12, 2007, which was not anticipated to occur until the third quarter. Oil production in the most recent quarter averaged 9,085 barrels per day, up 11% from the average of 8,187 Boe per day in the second quarter of 2006. Natural gas production in the second quarter of 2007 averaged 102.0 million cubic feet ("Mmcf") per day, down 15% from 119.6 Mmcf per day in the second quarter of 2006. Oil price realizations for the second quarter of 2007 averaged $59.89 per barrel, compared to $61.72 per barrel in the same period a year ago. Natural gas price realizations in the quarter averaged $7.76 per thousand cubic feet ("Mcf"), a 12% increase from $6.90 per Mcf in the second quarter of 2006. The Company, which discontinued cash flow hedge accounting as of April 2, 2007, recorded an unrealized gain on its derivative instruments of $1.9 million during the second quarter. The Company maintains a complete and periodically updated schedule of derivative positions under "Hedging" in the Investor Relations section of the Company's web site, www.eplweb.com. For the six months ended June 30, 2007, the Company reported a net loss to common stockholders of $2.6 million, or $0.07 per diluted share. Net income available to common stockholders was $27.4 million, or $0.68 per diluted share in the same period of 2006. Discretionary cash flow for the first two quarters of 2007 totaled $141.7 million, down 26% from $191.4 million in the same period a year ago. (See reconciliation of discretionary cash flow in table.) Cash flow from operating activities in the first six months of 2007 was $167.3 million, down 4% from the total of $174.9 million in the same period of 2006. For the first six months of 2007, the Company said capital expenditures for exploration and development activities totaled $183.4 million. The Company continues to anticipate that its 2007 capital budget for exploration and development activities will total approximately $300 million, which is intended to be funded from internally generated cash flow. As of June 30, 2007, the Company had cash on hand of $7.8 million, total debt of $474.5 million, and a debt to total capitalization ratio of 73%. The Company also had $180.0 million of remaining capacity available under its current bank facility which was refinanced in late April 2007 and has a borrowing base of $200 million. Operational Highlights The Company today announced a new discovery on the Shelf, the EI 311 #D-3 well. The moderate risk, moderate potential well drilled to a total depth of 8,031 feet and encountered high quality natural gas pay. The #D-3 well is expected to be on line in the third quarter of 2007, along with the previously announced EI 312 #D-2 discovery. Hunt Petroleum Corporation is the operator with a 60% working interest, and EPL holds the remaining 40% working interest. For the year-to-date, the Company has announced discoveries at ST 26, ST 41 and West Cameron 252, and two discoveries in the EI 311/312 area. Additionally, at EPL's 100% owned ST 46 field, the Company is continuing to test the #3 (A-1) well in one of the four sands discovered in the deep hole section. To date, EPL has discovered 14 sands in ST 46, with ten pay sands and 250 net feet of natural gas pay in the shallow section, and four additional sands with 100 feet of pay in the deep section, in which one of the sands is currently being tested. The Company is encouraged that the well testing efforts have confirmed this sand's productive capability, with high quality gas and associated condensate being sold directly into the field's gas sales line. The Company is evaluating another well to drill deeper, primarily to test a sizable amplitude below the sands discovered to date. Current Operations The Company is currently drilling four exploratory wells, including two on the Shelf and two onshore in south Louisiana. On the Shelf, the Company is drilling the moderate risk, moderate potential South Marsh Island 247 #1 well and the moderate risk, high potential ST 41 #B-3 Cap Rock well which has been deemed a discovery with the objectives seen to date and is preparing to drill to additional targets. The Company's onshore south Louisiana exploratory wells currently drilling include a moderate risk, moderate potential well called Tiger Bait in Terrebonne Parish and one high risk, high potential well called La Posada in Vermilion Parish. The Company plans to spud an additional three wells before year-end, including two moderate risk, high potential wells on the Shelf at EI 21 and ST 214. In addition, the Company said today the planned development work on the Raton discovery well is underway in Mississippi Canyon 248 located in the deepwater GOM. Richard A. Bachmann, EPL's Chairman and CEO, commented, "Our results in the first half of this year have been heavily influenced by the expenses from our M&A activity in 2006 and the debt tender offer completed this past April, along with more dry hole cost in the period than we have traditionally seen. The expenses resulting from our tender offer, as well as associated legal fees and financial advisory costs, are now behind us as we enter into the second half of the year." Bachmann added, "While we have had disappointments in this year's exploratory program, we have made a number of good discoveries. Also, we are encouraged that the #3 well is flowing naturally from just one of the four deep sands. And, this is without the benefit of any stimulation or fracturing techniques that could improve the already strong production rates. We will continue to test the #3 (A-1) well and sell the gas and condensate in the process, and use the information being gathered to evaluate another well to go deeper to test a large amplitude-supported target below our 14 discovery sands to date. On another positive note, we should finish drilling the ST 41 B-3 well within the next couple of weeks. Due to the number of high quality sands we have seen so far, it is already a commercial discovery with more sands left to be seen before we reach final depth. With the advantage of infrastructure already in place, the well is forecasted to be on line before the end of the third quarter. Beyond that, we still have six wells expected to be decisioned this year, including three high potential wells." Conference Call Information EPL has scheduled a conference call for today, August 8, 2007 at 8:30 A.M. central time to review second quarter and first half 2007 results. On the call, management will discuss operational and financial results, as well as provide third quarter and full year guidance. The Company has also posted a slide to the Investor Relations section of the Company's web site under "Conference Calls" to accompany comments made during the call today. 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 10972480. The call will be available for replay beginning two hours after the call is completed through midnight of August 13, 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 10972480. 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 and the posted slide 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 June 30, 2007 to be filed shortly, for a discussion of these risks. 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. -0- *T ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2007 2006 2007 2006 -------- -------- -------- -------- Revenues: Oil and natural gas $121,584 $121,080 $229,986 $230,204 Other 82 154 143 221 -------- -------- -------- -------- 121,666 121,234 230,129 230,425 -------- -------- -------- -------- Costs and expenses: Lease operating 17,437 17,121 34,186 29,486 Transportation expense 606 563 1,065 811 Taxes, other than on earnings 2,199 2,191 5,069 5,186 Exploration expenditures, dry hole costs and impairments 37,375 22,783 59,176 42,379 Depreciation, depletion and amortization 44,053 47,481 91,973 95,719 Accretion expense 1,103 2,151 2,203 1,058 General and administrative 13,507 12,281 35,902 24,737 Gain on insurance recoveries - - (8,084) - (Gain) loss on sale of assets (7,020) 1,345 (7,020) 419 Other (8) 1,459 (8) 1,458 -------- -------- -------- -------- Total costs and expenses 109,252 107,375 214,462 201,253 -------- -------- -------- -------- Business interruption recovery - 10,594 9,084 23,283 Income from operations 12,414 24,453 24,751 52,455 -------- -------- -------- -------- Other income (expense): Interest income 390 473 570 752 Interest expense (13,629) (5,199) (20,386) (10,283) Unrealized gain on derivative instruments 1,907 - 1,907 - Loss on early extinguishment of debt (10,838) - (10,838) - -------- -------- -------- -------- (22,170) (4,726) (28,747) (9,531) -------- -------- -------- -------- Income (loss) before income taxes (9,756) 19,727 (3,996) 42,924 Income taxes 3,486 (7,142) 1,422 (15,536) -------- -------- -------- -------- Net income (loss) (6,270) 12,585 (2,574) 27,388 Basic earnings (loss) per share $ (0.18) $ 0.33 $ (0.07) $ 0.72 ======== ======== ======== ======== Diluted earnings (loss) per share $ (0.18) $ 0.31 $ (0.07) $ 0.68 ======== ======== ======== ======== Weighted average common shares used in computing earnings (loss) per share: Basic 34,581 38,315 37,364 38,185 Incremental common shares - 2,253 - 2,323 -------- -------- -------- -------- Diluted 34,581 40,568 37,364 40,508 ======== ======== ======== ======== *T -0- *T ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2007 2006 2007 2006 -------- -------- -------- -------- Cash flows from operating activities: Net income (loss) $ (6,270) $ 12,585 $ (2,574) $ 27,388 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 45,155 49,632 94,176 96,777 Gain (loss) on disposal of assets (7,020) 2,830 (7,020) 2,830 Non-cash compensation 2,465 2,799 4,604 4,914 Non-cash loss on early extinguishment of debt 3,398 - 3,398 - Deferred income taxes (3,486) 7,142 (1,423) 15,819 Exploration expenditures 35,125 18,888 51,788 32,856 Amortization of deferred financing costs 331 244 565 493 Unrealized gain on derivative contracts (1,907) - (1,907) - Gain on insurance recoveries - - (8,084) - Other 451 501 830 795 Changes in operating assets and liabilities: Trade accounts receivable (488) (13,077) 3,330 (1,696) Other receivables 340 (11,553) 56,346 (24,156) Prepaid expenses (113) (1,156) (225) 968 Other assets (1,563) (518) (1,715) 332 Accounts payable and accrued expenses (12,678) 43,132 (24,521) 18,102 Other liabilities (226) (389) (264) (492) -------- -------- -------- -------- Net cash provided by operating activities $ 53,514 $111,060 $167,304 $174,930 ======== ======== ======== ======== Reconciliation of discretionary cash flow: Net cash provided by operating activities 53,514 111,060 167,304 174,930 Changes in working capital 14,728 (16,439) (32,951) 6,942 Non-cash exploration expenditures (35,125) (18,888) (51,788) (32,856) Total exploration expenditures 37,375 22,783 59,176 42,379 -------- -------- -------- -------- Discretionary cash flow $ 70,492 $ 98,516 $141,741 $191,395 ======== ======== ======== ======== 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 anaylsts 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. *T -0- *T ENERGY PARTNERS, LTD. SELECTED PRODUCTION, PRICING AND OPERATIONAL STATISTICS (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2007 2006 2007 2006 -------- -------- ------- -------- PRODUCTION AND PRICING ------------------------------- Net Production (per day): Oil (Bbls) 9,085 8,187 9,164 7,689 Natural gas (Mcf) 102,047 119,578 101,242 107,274 Total (Boe) 26,093 28,117 26,038 25,568 Oil and Natural Gas Revenues (in thousands): Oil $ 49,513 $ 45,981 $ 93,861 $ 84,234 Natural gas 72,071 75,099 136,125 145,970 Total 121,584 121,080 229,986 230,204 Average Sales Prices (1): Oil (per Bbl) $ 59.89 $ 61.72 $ 56.59 $ 60.53 Natural gas (per Mcf) 7.76 6.90 7.43 7.52 Average (per Boe) 51.20 47.32 48.80 49.74 Impact of hedging: Oil (per Bbl) $ - $ - $ - $ - Natural gas (per Mcf) - - - (0.05) OPERATIONAL STATISTICS ------------------------------- Average Costs (per Boe): Lease operating expense $ 7.34 $ 6.69 $ 7.25 $ 6.37 Taxes, other than on earnings 0.93 0.86 1.08 1.12 Depreciation, depletion and amortization 18.55 18.56 19.52 20.68 Accretion expense 0.46 0.84 0.47 0.23 *T -0- *T ENERGY PARTNERS, LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, December 31, 2007 2006 ----------- ------------ (Unaudited) ASSETS ------------------------------------------- Current assets: Cash and cash equivalents $ 7,837 $ 3,214 Trade accounts receivable 70,802 74,132 Fair value of commodity derivative instruments 1,661 - Other receivables 1,923 58,269 Deferred tax asset 1,362 1,387 Prepaid expenses 3,795 3,570 ----------- ------------ Total current assets 87,380 140,572 Property and equipment, at cost under the successful efforts method of accounting for oil and natural gas properties 1,453,649 1,527,304 Less accumulated depreciation, depletion and amortization (641,171) (680,845) ----------- ------------ Net property and equipment 812,478 846,459 Other assets 14,753 13,029 Deferred financing costs -- net of accumulated amortization 10,705 3,785 ----------- ------------ $ 925,316 $ 1,003,845 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------------- Current liabilities: Accounts payable $ 27,381 $ 47,154 Accrued expenses 116,048 133,198 Fair value of commodity derivative instruments 382 1,552 ----------- ------------ Total current liabilities 143,811 181,904 Long-term debt 474,501 317,000 Deferred income taxes 61,003 62,451 Asset retirement obligation 69,238 68,767 Fair value of commodity derivative instruments 938 - Other 1,554 1,453 ----------- ------------ 751,045 631,575 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 100,000,000 shares; issued and outstanding: 2007 - 43,918,713 shares; 2006 - 42,501,726 shares 440 425 Additional paid-in capital 369,973 365,313 Accumulated other comprehensive loss (995) (994) Retained earnings 62,393 64,966 Treasury stock, at cost. 2007 -- 12,180,486 shares; 2006 -- 3,479,814 shares (257,540) (57,440) ----------- ------------ Total stockholders' equity 174,271 372,270 Commitments and contingencies ----------- ------------ $ 925,316 $ 1,003,845 =========== ============ *T Energy Partners, Ltd. (�EPL� or the �Company�) (NYSE:EPL) today reported financial and operational results for the second quarter of 2007. The Company also announced another discovery on the Gulf of Mexico Shelf (�Shelf�) in the Eugene Island (�EI�) 311/312 area, making it the second discovery in this area this year, and the third discovery since drilling began in late 2006. The Company has four exploratory wells drilling and three wells planned to spud before the end of year. Four of seven wells currently drilling or scheduled to drill are high potential. Financial Results The Company reported a net loss to common stockholders of $6.3 million, or $0.18 per diluted share, for the second quarter of 2007 compared to net income available to common stockholders of $12.6 million, or $0.31 per diluted share, for the second quarter of 2006. Results for the second quarter included a pre-tax gain of $7.0 million primarily related to the previously announced sale of substantially all of EPL�s onshore South Louisiana assets that closed in mid-June, as well as an unrealized gain of $1.9 million on its derivative instruments. The quarter also included pre-tax costs of $10.8 million associated with the early extinguishment of the Company�s 8 �% Senior Notes due 2010 and the refinancing of its bank credit facility, which included $3.4 million of non-cash charges. Revenue for the second quarter of 2007 rose to $121.7 million, representing a new record high for the Company. This was a slight increase over the prior record revenue of $121.2 million set in the second quarter of 2006. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expenses, was $70.5 million, compared with $98.5 million in the second quarter of last year. (See reconciliation of discretionary cash flow schedule in the tables.) Cash flow from operating activities in the second quarter of 2007 was $53.5 million compared with $111.1 million in the same quarter a year ago. EPL benefited from strong production volumes and commodity prices during the second quarter of 2007, as well as cash proceeds from its onshore asset divestiture totaling $67.5 million after closing adjustments through June�30, 2007. These benefits were reduced in the quarter by expenses related to the repurchase of its senior notes due 2010 and higher exploration costs. The higher exploration costs were primarily the result of dry hole costs totaling $28.2 million mainly related to three high working interest wells, as well as $7.0 million for the impairment of two small properties that depleted. The Company said depreciation, depletion and amortization (�DD&A�) expenses per barrel of oil equivalent (�Boe�) trended down to $18.55 per Boe in the second quarter of 2007, representing a significant decrease from the reported first quarter of 2007 DD&A rate of $20.49 per Boe, and a level lower than any reporting period in 2006. Production for the second quarter of 2007 averaged 26,093 Boe per day. Production volumes were within the guidance range provided for the quarter despite the impact of an estimated decrease of 400 Boe per day due to the earlier than expected closing of the sale of its onshore south Louisiana divestiture package on June 12, 2007, which was not anticipated to occur until the third quarter. Oil production in the most recent quarter averaged 9,085 barrels per day, up 11% from the average of 8,187 Boe per day in the second quarter of 2006. Natural gas production in the second quarter of 2007 averaged 102.0 million cubic feet (�Mmcf�) per day, down 15% from 119.6 Mmcf per day in the second quarter of 2006. Oil price realizations for the second quarter of 2007 averaged $59.89 per barrel, compared to $61.72 per barrel in the same period a year ago. Natural gas price realizations in the quarter averaged $7.76 per thousand cubic feet (�Mcf�), a 12% increase from $6.90 per Mcf in the second quarter of 2006. The Company, which discontinued cash flow hedge accounting as of April 2, 2007, recorded an unrealized gain on its derivative instruments of $1.9 million during the second quarter. The Company maintains a complete and periodically updated schedule of derivative positions under �Hedging� in the Investor Relations section of the Company�s web site, www.eplweb.com. For the six months ended June 30, 2007, the Company reported a net loss to common stockholders of $2.6 million, or $0.07 per diluted share. Net income available to common stockholders was $27.4 million, or $0.68 per diluted share in the same period of 2006. Discretionary cash flow for the first two quarters of 2007 totaled $141.7 million, down 26% from $191.4 million in the same period a year ago. (See reconciliation of discretionary cash flow in table.) Cash flow from operating activities in the first six months of 2007 was $167.3 million, down 4% from the total of $174.9 million in the same period of 2006. For the first six months of 2007, the Company said capital expenditures for exploration and development activities totaled $183.4 million. The Company continues to anticipate that its 2007 capital budget for exploration and development activities will total approximately $300 million, which is intended to be funded from internally generated cash flow. As of June 30, 2007, the Company had cash on hand of $7.8 million, total debt of $474.5 million, and a debt to total capitalization ratio of 73%. The Company also had $180.0 million of remaining capacity available under its current bank facility which was refinanced in late April 2007 and has a borrowing base of $200 million. Operational Highlights The Company today announced a new discovery on the Shelf, the EI 311 #D-3 well. The moderate risk, moderate potential well drilled to a total depth of 8,031 feet and encountered high quality natural gas pay. The #D-3 well is expected to be on line in the third quarter of 2007, along with the previously announced EI 312 #D-2 discovery. Hunt Petroleum Corporation is the operator with a 60% working interest, and EPL holds the remaining 40% working interest. For the year-to-date, the Company has announced discoveries at ST 26, ST 41 and West Cameron 252, and two discoveries in the EI 311/312 area. Additionally, at EPL�s 100% owned ST 46 field, the Company is continuing to test the #3 (A-1) well in one of the four sands discovered in the deep hole section. To date, EPL has discovered 14 sands in ST 46, with ten pay sands and 250 net feet of natural gas pay in the shallow section, and four additional sands with 100 feet of pay in the deep section, in which one of the sands is currently being tested. The Company is encouraged that the well testing efforts have confirmed this sand�s productive capability, with high quality gas and associated condensate being sold directly into the field�s gas sales line. The Company is evaluating another well to drill deeper, primarily to test a sizable amplitude below the sands discovered to date. Current Operations The Company is currently drilling four exploratory wells, including two on the Shelf and two onshore in south Louisiana. On the Shelf, the Company is drilling the moderate risk, moderate potential South Marsh Island 247 #1 well and the moderate risk, high potential ST 41 #B-3 Cap Rock well which has been deemed a discovery with the objectives seen to date and is preparing to drill to additional targets. The Company�s onshore south Louisiana exploratory wells currently drilling include a moderate risk, moderate potential well called Tiger Bait in Terrebonne Parish and one high risk, high potential well called La Posada in Vermilion Parish. The Company plans to spud an additional three wells before year-end, including two moderate risk, high potential wells on the Shelf at EI 21 and ST 214. In addition, the Company said today the planned development work on the Raton discovery well is underway in Mississippi Canyon 248 located in the deepwater GOM. Richard A. Bachmann, EPL�s Chairman and CEO, commented, �Our results in the first half of this year have been heavily influenced by the expenses from our M&A activity in 2006 and the debt tender offer completed this past April, along with more dry hole cost in the period than we have traditionally seen. The expenses resulting from our tender offer, as well as associated legal fees and financial advisory costs, are now behind us as we enter into the second half of the year.� Bachmann added, �While we have had disappointments in this year�s exploratory program, we have made a number of good discoveries. Also, we are encouraged that the #3 well is flowing naturally from just one of the four deep sands. And, this is without the benefit of any stimulation or fracturing techniques that could improve the already strong production rates. We will continue to test the #3 (A-1) well and sell the gas and condensate in the process, and use the information being gathered to evaluate another well to go deeper to test a large amplitude-supported target below our 14 discovery sands to date. On another positive note, we should finish drilling the ST 41 B-3 well within the next couple of weeks. Due to the number of high quality sands we have seen so far, it is already a commercial discovery with more sands left to be seen before we reach final depth. With the advantage of infrastructure already in place, the well is forecasted to be on line before the end of the third quarter. Beyond that, we still have six wells expected to be decisioned this year, including three high potential wells.� Conference Call Information EPL has scheduled a conference call for today, August 8, 2007 at 8:30 A.M. central time to review second quarter and first half 2007 results. On the call, management will discuss operational and financial results, as well as provide third quarter and full year guidance. The Company has also posted a slide to the Investor Relations section of the Company�s web site under �Conference Calls� to accompany comments made during the call today. 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 10972480. The call will be available for replay beginning two hours after the call is completed through midnight of August 13, 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 10972480. 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 and the posted slide 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 June 30, 2007 to be filed shortly, for a discussion of these risks. 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 Six Months Ended June 30, June 30, 2007 � 2006 � 2007 � 2006 � Revenues: Oil and natural gas $ 121,584 $ 121,080 $ 229,986 $ 230,204 Other 82 � 154 � 143 � 221 � 121,666 � 121,234 � 230,129 � 230,425 � � Costs and expenses: Lease operating 17,437 17,121 34,186 29,486 Transportation expense 606 563 1,065 811 Taxes, other than on earnings 2,199 2,191 5,069 5,186 Exploration expenditures, dry hole costs and impairments 37,375 22,783 59,176 42,379 Depreciation, depletion and amortization 44,053 47,481 91,973 95,719 Accretion expense 1,103 2,151 2,203 1,058 General and administrative 13,507 12,281 35,902 24,737 Gain on insurance recoveries - - (8,084 ) - (Gain) loss on sale of assets (7,020 ) 1,345 (7,020 ) 419 Other (8 ) 1,459 � (8 ) 1,458 � Total costs and expenses 109,252 � 107,375 � 214,462 � 201,253 � � Business interruption recovery - 10,594 9,084 23,283 Income from operations 12,414 � 24,453 � 24,751 � 52,455 � � Other income (expense): Interest income 390 473 570 752 Interest expense (13,629 ) (5,199 ) (20,386 ) (10,283 ) Unrealized gain on derivative instruments 1,907 - 1,907 - Loss on early extinguishment of debt (10,838 ) - � (10,838 ) - (22,170 ) (4,726 ) (28,747 ) (9,531 ) � � Income (loss) before income taxes (9,756 ) 19,727 (3,996 ) 42,924 Income taxes 3,486 � (7,142 ) 1,422 � (15,536 ) � � Net income (loss) (6,270 ) 12,585 (2,574 ) 27,388 � � Basic earnings (loss) per share $ (0.18 ) $ 0.33 � $ (0.07 ) $ 0.72 � � Diluted earnings (loss) per share $ (0.18 ) $ 0.31 � $ (0.07 ) $ 0.68 � � Weighted average common shares used in computing earnings (loss) per share: Basic 34,581 38,315 37,364 38,185 Incremental common shares - � 2,253 � - � 2,323 � Diluted 34,581 � 40,568 � 37,364 � 40,508 � � ENERGY PARTNERS, LTD. CONSOLIDATED STATEMENTS OF NET CASH PROVIDED BY OPERATING ACTIVITIES (In thousands) (Unaudited) � � � Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Cash flows from operating activities: Net income (loss) $ (6,270 ) $ 12,585 $ (2,574 ) $ 27,388 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 45,155 49,632 94,176 96,777 Gain (loss) on disposal of assets (7,020 ) 2,830 (7,020 ) 2,830 Non-cash compensation 2,465 2,799 4,604 4,914 Non-cash loss on early extinguishment of debt 3,398 - 3,398 - Deferred income taxes (3,486 ) 7,142 (1,423 ) 15,819 Exploration expenditures 35,125 18,888 51,788 32,856 Amortization of deferred financing costs 331 244 565 493 Unrealized gain on derivative contracts (1,907 ) - (1,907 ) - Gain on insurance recoveries - - (8,084 ) - Other 451 501 830 795 Changes in operating assets and liabilities: Trade accounts receivable (488 ) (13,077 ) 3,330 (1,696 ) Other receivables 340 (11,553 ) 56,346 (24,156 ) Prepaid expenses (113 ) (1,156 ) (225 ) 968 Other assets (1,563 ) (518 ) (1,715 ) 332 Accounts payable and accrued expenses (12,678 ) 43,132 (24,521 ) 18,102 Other liabilities (226 ) (389 ) (264 ) (492 ) � Net cash provided by operating activities $ 53,514 � $ 111,060 � $ 167,304 � $ 174,930 � � Reconciliation of discretionary cash flow: Net cash provided by operating activities 53,514 111,060 167,304 174,930 Changes in working capital 14,728 (16,439 ) (32,951 ) 6,942 Non-cash exploration expenditures (35,125 ) (18,888 ) (51,788 ) (32,856 ) Total exploration expenditures 37,375 � 22,783 � 59,176 � 42,379 � Discretionary cash flow $ 70,492 � $ 98,516 � $ 141,741 � $ 191,395 � � 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 anaylsts 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 Six Months Ended June 30, June 30, 2007 2006 2007 2006 � � PRODUCTION AND PRICING Net Production (per day): Oil (Bbls) 9,085 8,187 9,164 7,689 Natural gas (Mcf) 102,047 119,578 101,242 107,274 Total (Boe) 26,093 28,117 26,038 25,568 Oil and Natural Gas Revenues (in thousands): Oil $ 49,513 $ 45,981 $ 93,861 $ 84,234 Natural gas 72,071 75,099 136,125 145,970 Total 121,584 121,080 229,986 230,204 Average Sales Prices (1): Oil (per Bbl) $ 59.89 $ 61.72 $ 56.59 $ 60.53 Natural gas (per Mcf) 7.76 6.90 7.43 7.52 Average (per Boe) 51.20 47.32 48.80 49.74 � Impact of hedging: Oil (per Bbl) $ - $ - $ - $ - Natural gas (per Mcf) - - - (0.05 ) � OPERATIONAL STATISTICS Average Costs (per Boe): Lease operating expense $ 7.34 $ 6.69 $ 7.25 $ 6.37 Taxes, other than on earnings 0.93 0.86 1.08 1.12 Depreciation, depletion and amortization 18.55 18.56 19.52 20.68 Accretion expense 0.46 0.84 0.47 0.23 ENERGY PARTNERS, LTD. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) � June 30, December 31, 2007 2006 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 7,837 $ 3,214 Trade accounts receivable 70,802 74,132 Fair value of commodity derivative instruments 1,661 - Other receivables 1,923 58,269 Deferred tax asset 1,362 1,387 Prepaid expenses 3,795 � 3,570 � Total current assets 87,380 140,572 � Property and equipment, at cost under the successful efforts method of accounting for oil and natural gas properties 1,453,649 1,527,304 Less accumulated depreciation, depletion and amortization (641,171 ) (680,845 ) Net property and equipment 812,478 846,459 � Other assets 14,753 13,029 Deferred financing costs -- net of accumulated amortization 10,705 � 3,785 � $ 925,316 � $ 1,003,845 � � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 27,381 $ 47,154 Accrued expenses 116,048 133,198 Fair value of commodity derivative instruments 382 � 1,552 � Total current liabilities 143,811 181,904 � Long-term debt 474,501 317,000 Deferred income taxes 61,003 62,451 Asset retirement obligation 69,238 68,767 Fair value of commodity derivative instruments 938 - Other 1,554 � 1,453 � 751,045 631,575 � 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 100,000,000 shares; issued and outstanding: 2007 � 43,918,713 shares; 2006 � 42,501,726 shares 440 425 Additional paid-in capital 369,973 365,313 Accumulated other comprehensive loss (995 ) (994 ) Retained earnings 62,393 64,966 Treasury stock, at cost. 2007 -- 12,180,486 shares; 2006 -- 3,479,814 shares (257,540 ) (57,440 ) Total stockholders� equity 174,271 372,270 Commitments and contingencies � � $ 925,316 � $ 1,003,845 �