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No. of Recommendations: 7

I see you have really done your homework on EPL! I suggest you contact Investor Relations for the answers to these questions as I am certainly not qualified to answer them, I will tell you what I do know as best I can but I only get the same information that is available to the public plus a little insight but certainly not insider info.

1) How is the current divestiture impacts the hedges. I am trying to understand post divestiture, how the hedging position will look like.

Divesture package is primarily tail end properties that contribute very little to production. Many of these properties have no production at all. I doubt our hedging positions changed at all since most of the hedges were put in place after a descision to divest these properties was made.

2) I see 2007 cap-ex program at $300M results in -ve cash flow, given your cash flow from Dep & Amort, is not going to be sufficient. Is this a concern for you? I pretty much see the same for 2008 also.

I don't understand how you come to the conclusion that the we will get into negative cash flow with the current CAPEX budget. Our cash flow should exceed our budget and leave us with spare money to pay down debt. This budget is about $100M less than last year's budget yet production is substantially higher as well as gas prices. EPL has committed to not outspending its cashflow unless it has a very strong reason to. I think the company will focus on paying down debt and improving the balance sheet over the next few years.

3) In your opinion, do you think the tender and asset divestiture increased the value for the existing shareholders (ignoring the share price movement)?

I think the tender was an effort to throw the shareholders a bone because they rejected the $23 offer. The BOD and the executives all believe the company is worth significantly more than $23 and I would agree based on the value of similar deals. I wish they had simply executed a share buy back plan which would have netted a heck of a lot more shares. The asset divestiture has definitely been a good thing. I think EPL received a lot more than they thought they would from the onshore properties (ironically, we sold them to Castex whom they bought them from 2 years earlier). However, it should be noted that they have not yet sold the offshore assets yet and may not get as good of price for that. Since the 2005 hurricane season it has been very difficult to sell offshore assets and I think that is why no realistic bidders emerged during the "alternative strategies" fiasco last year. Before the hurricanes, a competitor or private equity group would have snatched us up for at least $30/share IMO.

4) I own Williams and I see your success rate with wells are not as high as williams. I know williams is mainly inland. Is it something to do with the territory and comparable to those who operate on those territories?

Williams is strictly an onshore resource play company in addition to its primary business as a pipeline company. Resource plays very low risk plays like tight-gas, shale-gas and coal-bed methane. These plays require thousands of wells drilled on a grid (usually) that produce marginal amounts of gas. They are extremely sensitive to gas prices since they are marginal plays that were not economic a few years ago. Many of these plays are not economic below $6.50 gas which is where we are today. EPL and other offshore players are drilling much riskier wells but with very strong production rates. Many of Williams' wells may make a few thousand cu. ft. per day (mcf/d) whereas an average offshore well will make around 10 million/day. EPL has made some discoveries that have made over 40 mmcf/d. Often offshore wells will pay out in a few months and give returns in excess of 100% whereas resource plays generally pay out in 3-5 years and carry a 10-20% IRR but with very little exploration risk. Big companies have shifted toward resource plays in recent years because they can book large reseves that will stay on the books for 20-50 years but they are not large income generators. Small companies like EPL like offshore plays where they can generate a lot of cash flow to quickly grow the company and eventually diversify into deepwater or international plays.

5) Lastly, I see the company is actively trying to perform asset divestiture to reduce the debt. I see you EPL had already sold 1/3rd and I assume the rest of the sale will also be completed as expected. But for some reason, the sale gets delayed, is there any impacts to EPL.

EPL is divesting non-core properties to reduce debt. The offshore properties are proving harder to divest since the 2005 hurricane season so I wouldn't assume anything. I know that this is an ongoing process but I'm sure people are not beating down the door to see our junk. EPL said they expected about $125M from the whole package and they got $72M for the onshore part. That is very good considering it was only a 1/3 of the properties. If they don't find a buyer for the offshore properties it won't substantially hurt them but they will have to pay the interest on that $57M meanwhile. I suspect EPL will have to pull out some of the really bad properties (liabilities) or add a couple more producing properties and remarket the package later on if they can't reach a deal soon. It shouldn't be a significant impact to the share price or earnings but it doesn't help the balance sheet either.

Hope this helps. Like I said, I don't have any insider knowledge just a little insight.

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