SAN ANTONIO—With fluctuating costs in well development, EP Energy Corp.’s president and CEO, Russell Parker, said efficiency is the key in the Eagle Ford.

Parker, speaking during Hart Energy’s recently held DUG Eagle Ford Conference & Exhibition, said industry inflation in some areas, most notably in transportation, has meant remaining capital-efficient in other areas to keep profits up.

“First and foremost you’ve got to be cash flow neutral when production is flat,” Parker said. “Growth is important and growth can be a gift but if you can’t maintain base production at a flat level and actually be cash flow neutral or throw off a little bit of cash, then as you grow you actually destroy capital.”

For EP Energy, that has meant focusing on lease operating expenses and keeping development costs under control to make the company’s capital even more efficient. It has done so with the approach of pad by pad, well by well, completion by completion in order to be as efficient as possible.

“What we are finding is that we are driving our maintenance capital further and further down,” Parker said. “A couple of years ago that number was closer to $600 millionjust to hold rates flat. In 2019 we think we will be in the $450 million to $475 million range which is very, very important because you have to be cash flow neutral if you are holding production flat.”

The focus has been to get as much oil out of the rock in the Eagle Ford, possibly in an effort to maximize economic recovery. EP Energy has its production based in the Permian, but the company has found that the most efficient thing it can do with its capital is to move it and deploy it into the Eagle Ford.

In doing so, Parker said EP Energy has increased its acreage footprint and production by about 30% since the fourth quarter of last year. EP Energy is now operational on its second Eagle Ford pile..

“We can’t just simply copy and paste well designs and bring them closer and closer together and assume that one plus one is three,” he said. “As a matter of fact, one plus one when you do that may just be acceleration. It may not even be two. It could be less than two.

“What you have to do is look at your acreage and what we have to do is try to find the most efficient development, the most efficient designs that we can which is really not a generational exercise. It’s truly a pad-by-pad, well-by-well exercise.”

Parker said a way to be as efficient and productive as possible is to incentivize employees. Every employee with EP Energy owns stock in the company.

“We’ve found that that has unlocked quite a bit of performance in our employee base, and we are also seeing it in our results,” he said. “Even our production operators in the field, our head receptionist—everyone in the company has stock in the company. That way when I win, they win or if they win, I win, shareholders win. We all win together. That way we all can be truly focused on value creation. That way we can all be thinking about spending money as if it were our own because part of it is.”

Encouraging innovation has also played a big role in company. EP Energy has created a culture that encourages employees to try new things.

“We have a very diligent process where we look at all of those changes when we do look backs and try to understand what was the value impact of each one those changes,” Parker said. “How did it benefit the organization? How can we go from there?

“Some of these changes didn’t work. Some of these changes did not materialize. The key is just being open and honest about that and actually calculating real returns and just making sure you don’t make the same mistake twice.

“We encourage our employees to try new things but if it doesn’t work please don’t try it twice.”

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