Energy Partners May Be Especially Timely For New Investment

Volatility that struck EPL on the upside in June has struck the stock on the downside in September.  We do not have any explanation for the recent weakness.  It only takes a little selling pressure from an unknown source to affect the price of a stock we now classify as a Micro Cap considering that only about 30% of the shares are widely held.

As one might expect, EPL is employing fewer drilling rigs with the decline in natural gas price.  Two of the remaining rigs are drilling exploratory prospects rather than development wells as the company has been emphasizing until now.  Favorable results that could be known by month end might have a magnified impact on stock price from the currently depressed level.  The X 8-A prospect in the Bay Marchand area has reserve potential of 40 million barrels (60% EPL working interest), enough to add several dollars per share of value if successful.

While we call EPL a gas stock from time to time, the company would generate 72% of its next twelve months revenue from oil by our projections.  The dominant oil representation makes the recent stock price decline more puzzling, as oil price remains strong.