OREANDA-NEWS. May 25, 2017. EP Energy Corporation (NYSE:EPE) and Tesoro Corporation (NYSE: TSO) announced the formation of 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 Joint Venture Highlights

  • 60 well program
  • Tesoro to provide a capital carry in exchange for 50 percent 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.

"In the Altamont field we have a deep inventory of high-return drilling opportunities. This joint venture will enable us to significantly increase the well-level returns and capital efficiency of our program," said Brent Smolik, Chairman, President, and Chief Executive Officer of EP Energy Corporation. "We plan to keep two rigs active in the Uinta Basin and look forward to building a long-term relationship with Tesoro, an in-basin refinery partner."

"This agreement with EP Energy is an important step to further enhance our integrated value chain in the Rockies by supporting the growth of waxy crude oil production in the Uinta Basin, and allowing us to secure additional supply of this advantaged crude oil to further optimize the operation of our Salt Lake City Refinery," said Greg Goff, Chairman, President and CEO of Tesoro. "We believe this investment in crude oil production in Utah is good for our shareholders, our communities and for the State of Utah as it supports economic development in the region."

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 percent.

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.

About EP Energy
The EP Energy team has a passion for finding and producing the oil and natural gas that enriches people's lives.  EP Energy has a proven strategy, a significant reserve base, multi-year drilling opportunities, and a strategic presence in a number of the country's leading unconventional resource areas in North American. EP Energy is active in key phases of the E&P value chain—acquiring, developing and producing oil and natural gas. For more information about EP Energy, visit epenergy.com.

About Tesoro
Tesoro Corporation, a Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of over 895,000 barrels per day and ownership in a logistics business, which includes an interest in Tesoro Logistics LP (NYSE: TLLP) and ownership of its general partner. Tesoro's retail-marketing system includes over 2,500 retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA Gasoline(TM), Rebel(TM) and Tesoro® brands.