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Buy-recommended Energy Partners Ltd. (EPL) offers 29% appreciation potential to estimated net present value of $32 a share, lowered from $38. Year-end reserves just disclosed included a downward revision that contributes to a reduction in adjusted reserve life index to 5.2 years from 5.7. Considering that production lost as a result of damage caused by last year’s hurricanes is still not fully restored, we also need to be cautious in our expectations for the next twelve months.

After disappointing exploration results last year, the company is drilling fewer wells in 2006, but with larger targets. A well drilling to test part of the high-potential Denali prospect in the Gulf of Mexico near the mouth of the Mississippi River may reach total depth in April. In a major strategic change, EPL is entering deep water exploration through an agreement with Noble Energy that includes participation in two wells this year.


Original Publication Date: 2/24/06
Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at kurt@mcdep.com.

Source: Major Strategic Change At Energy Partners (EPL)