In the process, EPL made a big bet new technologies and a resurrection of Gulf activity would prove a winning combination for production and earnings growth.
EPL's shift from natural gas to oil has paid off.
Since 2009, the company's oil production has grown to 82% of overall production, up from 36%.
In 2013, EPL expects oil production to grow another 71%, bringing the company's oil production to 18,000 barrels a day, up from 5,370 barrels a day in 2009 - a compounded 35% annual growth rate.
The success has come from both bolts on acquisitions and innovation.
Over the past two years, acquisitions and innovation have tripled EPL's reserves. Using deepwater techniques on EPL's Central Gulf assets has produced an impressive 90% project success rate, at a reasonable finding and development cost of $26/barrel of oil equivalent.
Those successes suggest EPL's $300 million capital spending budget for this year will be put to good work. The company remains focused on oil, with 95% of its spending aimed at the commodity.
Importantly, the company's tight fisted approach to spending means EPL should produce free cash of around $125 million this year. This will allow the company to pay down its revolver, improving the balance sheet.
The Hilcorp acquisition fuels future growth.
The acquired Hilcorp assets include 37 million barrels of oil equivalent in proved reserves - a bit more than 50% of which are oil - and over 10,000 barrels of oil equivalent per day of production. Overall, the deal doubles EPL's proved reserve base to 76.7 Mmboe while adding 149k net acres. This boosts total net Gulf of Mexico acres to 331k.
Those assets came to EPL in a circuitous route. Hilcorp acquired them from Chevron late last decade as part of a spending spree. But, Hilcorp over-reached, which limited its ability to invest in the play and created an opportunity for EPL.
Given the assets are near EPL's existing acreage, there's likely to be several synergies both in costs and in the company's ability to quickly digest forthcoming seismic data. This experience should allow EPL to ramp spending to exploit the play in 2014.
If the plan works out as hoped, shareholders could see reserves and production jump again next year.
And, while EPL is currently focused on oil it also has 10 gas projects ready to go as soon as pricing gets more favorable. This suggests additional opportunity for shareholders if natural gas prices continue higher, given nearly 40% of the company's reserves are natural gas. It also suggests EPL may be a more compelling idea than other Gulf competitors, such as Stone Energy (SGY) or W & T Offshore (WTI).