Net present value [NPV] of $31 a share exceeds stock price for buy-recommended Energy Partners (NYSE:EPL), but shareholders have seen no real growth in value for two years running.
Fourth quarter results reported on March 1 indicated that proven reserves declined slightly in 2006, while the company reinvested about 140% of discretionary cash flow. Because the company pays no dividend, NPV has to grow for shareholders to earn a long-term return.
Chairman Rick Bachmann and his team are redirecting efforts in 2007 to emphasize development around existing discoveries including the promising South Timbalier area as well as resources discovered last year, but not yet booked as proven reserves.
Meanwhile the well-publicized strategic alternatives process will get the full attention of the board of directors during the week of March 5. While the decline in EPL stock price since the process started last year suggests skepticism, investors are looking for better news to counter asset writedowns and takeover legal fees.
Originally published on March 2, 2007