New Orleans-based Energy Partners Ltd. (EPL), which has been trying to avoid a takeover by Australian-based Woodside Petroleum Ltd. subsidiary ATS Inc., on Monday lowered its 3Q2006 production guidance, citing equipment delays and mechanical issues at its South Timbalier and Eugene Island leases.

The mechanical and equipment issues have been resolved, and EPL expects output to reach about 30,000 boe/d by the middle of next week. However, production from July through September averaged 25,000-26,000 boe/d, which was lower than previously forecast. EPL plans to update its guidance for the rest of the year in a conference call in early November. EPL, which operates in the shallow to moderately deep waters of the Gulf of Mexico, had interests in 38 producing fields and was developing five other fields at the end of 2005.

The production delays were related to mechanical problems at two wells in the South Timbalier 41/42 field area, mechanical problems coupled with construction crew and equipment delays at South Timbalier 26, and equipment delays affecting new production from Eugene Island 277.

Costs during the quarter also were be higher, EPL said in a statement. Lease operating expenses for 3Q2006 are expected to fall between $6.75 and $7.75/boe, mostly because of increased service costs related to maintenance, labor and transportation, storm-related expenses not covered by insurance, nonroutine workover expenses associated with a well intervention, and the impact of the reduced production volumes. Exploration costs are estimated to range between $12 million and $16 million.

Meanwhile, general and administrative expenses for the quarter are expected to range between $19 million and $22 million “due to significant additional legal and financial advisory costs associated with the unsolicited conditional offer by ATS.”

EPL last month rejected ATS’ offer of about $883 million, or $23/share (see Daily GPI, Sept. 15). The ATS offer has been extended to Oct. 20. On Friday, EPL closed at $24.65/share, and at midday Monday, it was trading at $24.54.

On Friday, ATS filed a preliminary consent solicitation seeking shareholder approval to remove EPL’s board. EPL notified shareholders in a Securities and Exchange Commission filing that ATS is seeking approval of its five nominees to EPL’s board: Walter R. Arnheim, Terry G. Dallas, Robert B. Holland III, David R. Martin and J. Kenneth Thompson.

Separately, ATS said last week it also is soliciting proxies from shareholders to vote against EPL’s proposed $2.2 billion acquisition of Lafayette, LA-based Stone Energy Corp. (see Daily GPI, June 26). One of the conditions of the ATS offer is that EPL abandon its merger with Stone. Stone had said its merger agreement prevented EPL from entering into discussions with third parties. However, a Delaware court ruled last week that EPL could enter into the third-party talks. The Stone acquisition had been expected to close by the end of the year.

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