EP Energy (EPE, Financial) ended fiscal 2014 on a positive note and is now aiming for stronger results in 2015. The company’s results were impressive last quarter, with a strong improvement across all its key financial metrics. EP Energy is now optimistic about the growth in oil production as it is seeing some positive signs from its key operational areas such as the Eagle Ford and Wolfcamp. Let's take a look.
Opportunities to consider
There are many opportunities that the company is seeing across Eagle Ford. The analysts are forecasting Eagle Ford to contribute well to maintain the overall production levels for the companies dealing there including EP Energy. But the analysts are expecting fluctuations in the prices Eagle Ford Shale oil. However, EP has initiated an infield pilot program which happened to be a wise move by the company and it is now pleased to see its progress even in this shaky environment.
The company also has an attractive balance sheet which it thinks will be a further attraction to the investors. In addition, the company also has an exceptional hedge program which allows it to be geared up to face any hiccups in the market.
EP seems geared up for 2015 and is now focusing on various aspects to improve its profitability. It is now planning to ramp up the capital spending which will help to drive better operational efficiencies. This will also be a key player in bringing the costs down. The excellence in the operations will help EP Energy to fight the recent trends in the commodity prices. Perhaps, the cost reduction should not be a matter of great surprise to the company as is already realising lower CapEx cost that will surely bring greater reductions during whole year which will help EP growing its financial performance in 2015.
Strategic moves
Another strategic move that EP is planning to undertake in 2015 is to restart its Hynesville program which benefited it big time in the past. The present market conditions are also ideal for restarting this program. The lower oil prices and low gas breakeven costs associated with it are expected to benefit this step surely. This program is expected to help company to repeat the historic events of high end performance. Besides this, EP is also seeing significant production improvements in its Altamont program.
It has already completed three rigs in 11 wells and is already seeing a good growth in production levels. This brings ample growth opportunities for EP in 2015. To further add value to it, EP is also reducing its completion activities due to lower oil price environment. This initiative will help EP to reduce the costs further, driving better profit margins.
Conclusion
The stock looks dirt cheap with a trailing P/E of 3.22. The stock is expected to offer good earnings growth in future as its strategic initiatives indicate. It is offering a profit margin of 34.83% which is commendable and can gain much market share in the upcoming quarters. Looking at these valuation levels, EP Energy is definitely a good pick as of now.
