Vermilion completes acquisition of Southeast Saskatchewan assets
Vermilion Energy Inc. has completed the acquisition of Elkhorn Resources Inc. for approximately $427 million. Total consideration comprised the assumption of an estimated $42 million of debt, $180 million of cash, and the issuance of 2.8 million common shares of Vermilion valued at approximately $205 million (based on the closing price per Vermilion common share of $72.50 on the TSX on April 29, 2014). The acquired assets are comprised of high netback, light oil producing assets in the Northgate region of southeast Saskatchewan and include approximately 57,000 net acres of land (approximately 80% undeveloped), seven oil batteries, and preferential access to 50% or greater capacity at a solution gas facility that is currently under construction. The majority of production and development drilling opportunities are from the Midale formation, with additional opportunities identified in the Frobisher, Bakken and Three Forks/Torquay formations.
QEP Resources to sell non-core assets for $807M
QEP Energy Co., a wholly-owned subsidiary of QEP Resources Inc., has entered into three definitive agreements to sell non-core oil and gas properties in the Midcontinent and Williston Basin for a combined purchase price of approximately $807 million. Two of the agreements provide for the sale of oil and gas properties in the Cana-Woodford and Granite Wash plays in the Western Anadarko Basin in Texas and Oklahoma for a combined price of approximately $772 million (combined, the Midcontinent Divestitures). The Midcontinent Divestitures are expected to close on or before June 30, 2014. The Midcontinent Divestitures contain an estimated 463 billion cubic feet equivalent of proved reserves as of December 31, 2013 and current production of approximately 109 MMcfe/d of which approximately 37% is liquids. The third agreement provides for the sale of a non-core position in the western Williston Basin, known as "Fat Cat," for a price of approximately $35 million and is expected to close in early June. These three sale transactions are structured as a reverse like-kind exchange in which the tax basis of the divested assets is exchanged into the company's recently acquired Permian Basin properties. BMO Capital Markets served as financial advisor to QEP in the Midcontinent Divestitures, and Vinson & Elkins LLP provided legal counsel. Holland & Hart LLP provided legal counsel for the Williston Basin divestiture.
Devon acquires Cana-Woodford acreage
Oklahoma City, OK-based Devon Energy Corp. has agreed to acquire 50,000 net acres and associated production primarily in the Cana-Woodford Shale for $249 million in cash. The deal was signed simultaneously with, and represents half of the interests of, a deal in which Cimarex Energy acquired Cana-Woodford assets for $497.4 million in cash. Cimarex's share of the assets includes its estimate of proved developed reserves of approximately 140 billion cubic feet equivalent (64% gas) at January 1, 2014, current production of approximately 35 million cubic feet equivalent per day (63% gas) and 50,000 net acres, including 30,000 net acres in the Cana-Woodford area and oil-rich East Cana area. Approximately 65% of the proved developed reserves are associated with properties in which Cimarex already owns a working interest. Cimarex plans to fund the acquisition with bank debt. Devon's portion of the agreed acquisition includes current production of approximately 5,800 barrels of oil equivalent per day (37% liquids) and proved reserves of approximately 23 million barrels of oil equivalent as of January 1, 2014. According to Jefferies LLC calculations, Devon paid $43,000 per flowing boe, $5,000 per net acre. Devon now holds roughly 300,000 net acres in the Cana-Woodford. The transaction is expected to close by the end of 2Q14.
Midstates Petroleum closes Pine Prairie assets sale
Houston, TX-based Midstates Petroleum Co. Inc. has closed the previously announced sale of ownership interest in developed and undeveloped acreage in the Pine Prairie field area in Evangeline Parish, Louisiana for $170 million to a private buyer. The net proceeds were approximately $150 million which was net of customary closing adjustments. The majority of the proceeds will be used to reduce borrowings under the company's revolving credit facility and the balance will be used toward working capital. Midstates also terminated the arrangements for a $125 million temporary Bridge Facility. Midstates Petroleum's drilling and completion efforts are currently focused in the Mississippian Lime oil play in Oklahoma and Anadarko Basin in Texas and Oklahoma.
Sabine, Forest to merge
Sabine Oil & Gas LLC and Forest Oil Corp. have agreed to merge in an all-stock transaction, creating one of the industry's largest East Texas players. Together, the companies have a sizable collective Eagle Ford position, as well as Granite Wash, Permian and Arkoma positions that provide optionality for development and monetization. Upon completion, Sabine unit holders will own approximately 73.5% of the new combined entity and Forest shareholders will own approximately 26.5%. The combined entity, named Sabine Oil & Gas Corp., will be a newly formed parent company expected to list on the NYSE under the symbol "SABO". The combined entity will be headquartered in Houston and will be led by Sabine's current executive management team. The transaction is expected to be tax-free to Forest's shareholders. In addition to a top-tier 207,000 net acreage position in East Texas, the combination of assets creates a 65,000 net acreage position in the Eagle Ford. The combined company will have estimated proved reserves of 1.5 trillion cubic feet equivalent (71% gas) (as of December 31, 2013), and estimated daily production of 345 million cubic feet equivalent (65% gas) for 2014. Barclays Capital Inc. and Wells Fargo Securities LLC acted as financial advisors to Sabine. Tudor, Pickering, Holt & Co. is acting as an advisor to Sabine on portfolio optimization. Vinson & Elkins LLP acted as legal advisor to Sabine, while Simpson Thacher & Bartlett LLP advised Sabine on financing matters. Gibson, Dunn & Crutcher LLP acted as legal advisor to First Reserve in the transaction. JP Morgan Securities LLC acted as financial advisor to Forest, and Wachtell, Lipton, Rosen & Katz acted as legal advisor to Forest.
Legacy Reserves strikes alliance with WPX
Legacy Reserves LP has formed a strategic alliance with WPX Energy Inc. through a pending Piceance Basin acquisition for $355 million in cash consideration plus a portion of Legacy's newly-created Incentive Distribution Units. Key characteristics of the acquisition include 2,730 natural gas wells producing primarily from the Williams Fork formation spanning 3 fields within the greater Grand Valley of Garfield County, Colorado; approximately 29% working interest at closing increasing to approximately 37% on January 1, 2015 and approximately 41% on January 1, 2016; 276 bcfe of internally estimated proved reserves, 100% of which are proved developed producing, and of which 83% are natural gas, 15% are natural gas liquids and 2% are oil; and an estimated Q3 2014 production of 63 MMcfe/d yielding a 12.0 R/P ratio. WPX will be issued and immediately vest in 10% of the authorized IDRs and have the ability to vest in up to an additional 20% of the authorized IDRs contingent upon future drop-downs to Legacy. The remaining 70% of the authorized IDRs will remain at Legacy in treasury for the benefit of all limited partners until such time as Legacy may make future issuances to other parties. Cary D. Brown, chairman, president and CEO of Legacy Reserves GP LLC, the general partner of Legacy, commented: "Our 143 MMboe of internally estimated pro forma proved reserves will be comprised of 54% liquids which increases our portfolio diversification and expands our optionality in varying commodity price environments." Legacy intends to fund its pending acquisitions with borrowings under its April 2014 $1.5 billion credit facility. Wells Fargo Bank has committed to, and is seeking lender approval of, a $950 million borrowing base. In addition, Legacy has obtained consents from the majority lenders to increase its Debt / EBITDA covenant from 4.0x to 4.5x through June 30, 2015. Wells Fargo Securities is serving as exclusive financial advisor to Legacy.
Swift to develop Eagle Ford with PT Saka Energi
US subsidiaries of Swift Energy Co. and PT Saka Energi Indonesia have executed definitive agreements to fully develop approximately 8,300 acres of Fasken area Eagle Ford shale properties owned by Swift Energy in Webb County, Texas. The agreements provide for Saka to pay Swift Energy $175 million in total cash consideration to acquire a 36% full participating interest in Swift Energy's Fasken properties. The consideration is comprised of $125 million in cash to be paid at closing and $50 million in cash to be paid by Saka to carry a portion of Swift Energy's future field development costs. Swift Energy will continue to serve as operator of the Fasken properties, conducting all drilling, completion and production operations, with development plans for the field to be mutually agreed upon by Swift Energy and Saka as provided for in the definitive agreements. Terry Swift, CEO of Swift Energy, said the transaction allows the company "to reduce financial leverage in the near term and maintain capital spending levels that will support growth in 2015." Analysts at Global Hunter Securities said the "impressive valuation validates YTD drilling results at Fasken," noting that Swift will "reduce debt while maintaining its existing development plan, a positive development the market was anxiously anticipating." JP Morgan Securities LLC acted as financial advisor to Swift Energy, and Latham & Watkins LLP advised Swift on the transaction. Closing is anticipated on or about June 30, 2014.
EnerVest, FourPoint sign $275M JV
EnerVest Ltd., and its institutional partnerships along with its joint venture partner, FourPoint Energy LLC, has acquired $275 million in producing properties in the Western Anadarko Basin from an undisclosed seller. The deal includes acreage and producing wells in the Granite Wash formation in Hansford, Hemphill, Ochiltree, Roberts and Wheeler counties in Texas and Beckham, Custer, Dewey, Ellis, Roger Mills and Washita counties in Oklahoma. The properties and production include 31,880 Mcfe/d net production (43% liquids) from 642 wells, 47,000 net acres adjacent to current EnerVest/FourPoint production, a solid PDP base which makes up 52% of proved reserves and 75% of proved value, and an operated SWD system (100% WI). The acquisition is expected to close on or before June 30, 2014.
New Western Energy terminates merger plan
New Western Energy Corp. has terminated the previously announced Agreement of Plan of Merger to acquire all of the issued and outstanding common shares of Washington-based Legend Oil and Gas Ltd. New Western Energy will continue to explore other acquisition opportunities. Legend Oil and Gas is an exploration and production company with its core asset located in Alberta, Canada. The company also has leaseholds in Piqua, Kansas and the Bakken in North Dakota.
