EP Energy Corp. (NYSE:EPE) and Tesoro Corp. (NYSE: TSO) have formed a drilling joint venture, through respective subsidiaries, to fund oil and natural gas development in EP Energy's Altamont program located in the Uinta Basin of Utah. Additionally, EP Energy and Tesoro signed a multi-year crude oil supply agreement for yellow and black waxy crude oil to supply Tesoro's Salt Lake City Refinery.
Drilling JV highlights
• 60 well program
• Tesoro to provide a capital carry in exchange for 50% of EP Energy's working interest in joint venture wells
• Tesoro to purchase all oil production from joint venture wells
• EPE's net share of capital is expected to be approximately $64 million
• EPE will retain operational control of the joint venture assets
Tesoro and EP Energy also entered into a Crude Oil Supply Agreement, through which Tesoro will purchase all of the oil produced through the drilling joint venture, along with additional waxy crude oil produced by EP Energy in the Uinta Basin. This oil will provide assured supply of local crude oil for Tesoro's Salt Lake City Refinery.
The first wells under the joint venture are expected to begin production in July 2017. EP Energy's average working interest in the joint venture wells is currently approximately 80%.
EP Energy did not change its 2017 guidance for the new drilling venture; however the company expects to update its full year 2017 outlook mid-year.