Energy Partners Limited: Back on Track (EPL)

| About: EPL Oil (EPL)

Buy-recommended Energy Partners Ltd. (NYSE:EPL) is headed toward record quarterly production in the current period, up 23% from the average for all of 2005. While cash flow looks strong, earnings are not looking as good since the company expenses exploration, a conservative accounting practice when outlays are rising. Depreciation, depletion and amortization have also increased as indicated in the first quarter of 2006, which was reported on May 9. Practically all of the latest volume increase stems from a single prolific well, South Timbalier #B-2, flowing some six thousand barrels equivalent daily net to EPL. The stock has appreciation potential to estimated net present value [NPV] of $29 a share tied to a long-term oil price of $50 a barrel compared to the current six-year quote of $72 a barrel. Sparked by new volumes, our correlation with adjusted reserve life and next twelve months cash flow also points to higher NPV, subject to the agony and the ecstasy of high-stakes offshore exploration.

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