Industry Briefs
Largest-ever bond offering by Colombian company
Colombia's state-owned oil and gas producer, Ecopetrol, made a $2.5 billion offering of senior notes in September, the largest bond offering ever by a Colombian company. The notes were offered in three separate tranches and underwritten by Bank of America Merrill and Morgan Stanley. Milbank, Tweed, Hadley & McCloy advised underwriters in the offering. Ecopetrol has undertaken an ambitious growth plan to become a global oil and gas major, with an objective to achieve production of 1 million "clean barrels" of oil per day by 2015.
LINN spends $525M for bolt-on Permian Basin assets
LINN Energy signed a definitive purchase agreement to acquire oil and natural gas properties in the Permian Basin for $525 million. The company anticipates the acquisition will close during the fourth quarter of 2013. Characteristics expected from the acquisition include an estimated first 12 months net production of approximately 4,800 boe/d primarily from the Clearfork formation (approximately 63% oil), low operating expenses of roughly $15.00 per boe, operated with approximately 98% working interest, proved reserves of roughly 30 MMBoe (approximately 70% oil), reserves to production ratio of nearly 17 years, future additional waterflood reserve potential of approximately 24 MMboe, approximately 124 producing wells and more than 6,250 net acres, and roughly 300 identified future low—risk, infill drilling locations. LINN intends to finance this acquisition with proceeds from a committed $500 million senior secured term loan with certain participants in its lender group and borrowings under its revolving credit facility.
Halcon to divest certain conventional assets
Halcon Resources Corp. has entered into three separate purchase and sale agreements to divest certain non-core conventional assets located throughout the US for total consideration of approximately $302 million. The transactions are expected to close in the fourth quarter of 2013, subject to customary closing conditions and adjustments, with an effective date of July 1, 2013. In aggregate, as of December 31, 2012, estimated proved reserves associated with the properties were approximately 21.2 million barrels of oil equivalent, 67% of which was proved developed. Proved reserves were approximately 77% oil and NGLs, and these assets currently produce approximately 4,500 barrels of oil equivalent per day. While HK chairman and CEO Floyd C. Wilson, in a prepared statement, noted the divestment would provide the company with sufficient liquidity to execute on growth initiatives, analysts are hesitant.
Production from the assets represents roughly 13% of Halcon's current production. The $67K/flowing boepd sale price is "not a great price," but "within the realm of lowered expectations," noted analysts at Global Hunter Securities. The $302 million takeaway "helps with liquidity, but not by much on our math - after netting out our estimate of annual cash flow of these assets of $80MM-100MM, we think this deal doesn't even plug a quarter of outspend by HK," the analysts continued. BMO Capital Markets and Barclays are acting as financial advisors in connection with divestiture of the Properties.
New air cargo service launched for Libya's energy industry
Chapman Freeborn Airchartering has formed an exclusive partnership with Air Libya to place and operationally manage an Antonov An-26 aircraft in Libya - including regular services to the oil fields in the south of the country. The freighter will be based at Tripoli's Mitiga International Airport (MJI) on a long-term lease agreement. The venture will provide logistics solutions in a country where few international aviation companies are currently willing to invest in establishing cargo services. It will also provide a viable alternative to sea freight routes to and from Europe which have been subject to high rates. The An-26 - which offers a 5.5 ton payload - will be available for ad hoc cargo charter requirements within Libya as well as international flights to and from the EU and North Africa. The company plans to introduce internal scheduled services to connect Tripoli and Benghazi with Libya's more remote airfields. The An-26 is capable of utilizing short and unpaved runways in remote locations and features rear door loading and unloading capabilities. "Freight forwarders and energy industry clients will benefit from this cooperation which offers professional, reliable services between the country's key hubs and more remote locations," said Paul Drew, Chapman Freeborn's project manager, in a statement. "Given the limited air freight and sea freight options currently available, the news of this service has been very well received so far," he continued. Established in 1996, Air Libya has distinguished itself as being the first private aircraft operator to be granted an AOC in the country, as well as being the only airline based in Benghazi. Air Libya has focused its attention on increasing its fleet of aircraft to provide tailored solutions for the energy industry, as well as scheduled passenger services and chartered VIP flights.
First Reserve sells Brand Energy to CD&R
Energy-focused private equity firm First Reserve has agreed to sell Brand Energy & Infrastructure Services, a provider of specialty industrial services to North America's energy markets, to private investment firm Clayton, Dubilier & Rice (CD&R) for an undisclosed amount. The transaction is subject to certain regulatory approvals and is expected to close before the end of the year. CD&R has separately agreed to acquire the Infrastructure division of Harsco Corp. (Harsco Infrastructure) and intends to merge Brand and Harsco Infrastructure. The combined company will be named Brand Energy & Infrastructure Services and Paul Wood, current chairman and CEO of Brand, will serve as chairman and CEO of the combined company. Morgan Stanley acted as financial advisor to Brand and First Reserve. Simpson Thacher acted as legal advisor. Brand Energy's portfolio of specialized industrial service offerings include scaffolding, coatings, insulation, refractory, forming & shoring, cathodic protection, mechanical services and other related crafts.
Platte River gains Majority Stake in Wildcat Minerals
Platte River Equity has acquired a controlling stake in Golden, CO and Cheyenne, WY-based Wildcat Minerals LLC. Founded in 2007 as an oilfield consumables distributor, Wildcat has evolved to become an independent material handling solutions provider to proppant (sand) producers, providing everything from procurement, to inventory management and transloading.
Bartlit Beck Herman Palenchar & Scott LLP served as legal counsel to Platte River. KeyBanc Capital Markets served as financial advisor to Wildcat. Fifth Third Bank provided senior debt financing for the transaction.
Saratoga adds more leases from Louisiana lease sale
Saratoga Resources Inc. acquired two new leases at the Louisiana state lease sale, held on September 11, 2013 in Baton Rouge. Saratoga acquired leases on the 552.25 acre Panther Prospect and the 305.71 acre Tiger Toux Prospect, for a combined total of 857.96 acres. The leases are located in Breton Sound Blocks 18, 19 and 32, contiguous to Saratoga's existing lease holdings in the Breton Sound 18 and Breton Sound 32 fields and close to existing facilities and pipeline infrastructure. Saratoga has a 100% working interest in these three year leases, both of which carry a 21% royalty burden. Water depth at both prospect areas is less than 20 feet and drilling on both prospects, utilizing an inland barge rig, is expected to occur in early 2014. Both prospects are defined by high-quality 3D seismic data and abundant well control.
Synergy continues mini Wattenberg Field land grab
On September 16, 2013, Denver Julesburg-focused Synergy Resources Corp. entered into a Purchase and Sale Agreement with a private oil company for assets in the Wattenberg Field that include 21 producing oil and gas wells and leases covering 800 net acres. The purchase price for the assets will be $20.5 million, comprised of $17.8 million cash and $2.7 million in Synergy's common stock. The 21 producing vertical wells collectively produce approximately 300 boe/d net to Synergy's interest. Eight of these wells were brought into production during July, 2013. Synergy will be the operator and will receive a 100% working interest and 75% net revenue interest in these wells. The $20.5 million price, roughly $70,000 per flowing barrel, will be comprised of $17.8 million cash and $2.7 million SYRG shares. The deal follows another in late August in which Synergy agreed to buy 38 operated wells with a 27.5% WI and 22% NRI in 3,639 gross or 1,006 net acres, mostly in the core of the Wattenberg Field, from a private operator. That deal, which included interest in 9 non-operated wells, a 25% interest in a Class II disposal well, and 200 boepd of production, cost Synergy roughly $17.5 million (75% cash, 25% in common stock). In a note following the announcement, Wunderlich Securities analysts highlighted the two transactions, noting the positives of Synergy's method. "With 7 million warrants likely to be exercised, SYRG still has the dry powder to do at least one more transaction. We like SYRG's MO of consolidating smaller land packages under the radar screen. SYRG continues to use its stock as a currency and it is working. SYRG now has ~20,000 net acres in the Wattenberg core area and plans to grow its footprint to about 25,000 net acres by acquisition."
Petrofac to deliver training capabilities for PETRONAS
Petrofac has signed a US$120 million agreement with PETRONAS, the Malaysian National Oil Company, for the operation and management of two high-specification training facilities that Petrofac is building to support PETRONAS' workforce capability enhancement program. Petrofac is currently constructing two "live" upstream plant training facilities, and a "live" downstream facility, which will supplement existing facilities at the Institut Teknologi Petroleum Petronas (INSTEP) training academy. Under the latest phase of the agreement, Petrofac will undertake the ongoing management and operation of the two upstream facilities, which are capable of training 500 delegates each year, for the next five years with an option to extend for a further two years.
Harvey Gulf to acquire ACO's offshore vessels, related assets
Harvey Gulf International Marine LLC and Abdon Callais Offshore LLC (ACO) have executed a definitive agreement whereby Harvey Gulf is to purchase substantially all of ACO's assets and business. The purchase includes 48 offshore supply vessels, of which four are currently under construction. ACO has one of the youngest and largest fleets operating in the US Gulf of Mexico with a focus on providing a wide variety of cargo and personnel transportation services to both shallow water and deepwater locations. Of ACO's 48 vessel fleet, 92% is dynamically positioned (DP1 or DP2) and 58% is of 205 feet in length and longer. The transaction is expected to close in Q4 2013.
Mayer Brown LLP served as legal advisor to Harvey Gulf in connection with the transaction. Raymond James & Associates Inc. served as financial advisor, and Baldwin Haspel Burke and Mayer LLC served as legal advisor to ACO in connection with the transaction.
ZAZA, partner amend Eaglebine/eagle ford agreement
ZaZa Energy Corp. has signed a Second Amendment and First Restatement of Joint Exploration and Development Agreement with its current joint venture partner to further develop and expand its Eaglebine/Eagle Ford East assets. Under the agreement, ZaZa's JV partner has elected into Phase II ahead of the original schedule. As consideration, ZaZa will receive $17 million in cash and interests in 15 of its venture partner's wells outside of the Area of Mutual Interest (AMI) line in Madison County (the Southern Madison Wells) with an estimated PDP present value of $3 million. In addition, ZaZa will receive 100% carry consideration for one vertical well completion, two horizontal well completions, and a $1.25 million credit towards miscellaneous land or operational expenses. In return, ZaZa will assign to its JV partner 20,000 net Phase II acres. Also, as consideration for the assignment of at least 6,000 net former Phase III acres, ZaZa will receive additional interests in the Southern Madison Wells with an estimated incremental PDP present value of roughly $9 million. Pro forma for this transaction, ZaZa will retain approximately 14,000 net Phase III acres, and its JV partner has the option to elect into some or all of this acreage on or before January 31, 2014 by making a further cash payment to ZaZa. The original agreement called for a Phase III election by January 31, 2015.
Finally, the JV partner will assign to ZaZa a 25% working interest in approximately 19,000 net additional acres recently acquired by the JV partner in the agreement's AMI interest and related AMI interests in multiple producing wells with a PDP present value of approximately $4.1 million. The company also expects additional production in the near future from two recently drilled wells, in various stages of completion, within this newly assigned acreage. In return for the 25% working interest and immediately available production, ZaZa will pay $2 million and assign a 75% working interest in approximately 18,500 net acres of its retained acreage position in Walker and Madison Counties, Texas.
W&T Offshore Sells West Delta 29 interest
W&T Offshore Inc. has sold all of its working interest in West Delta 29 block (OCS 00385) located on the shelf of the Gulf of Mexico to EPL Oil & Gas Inc. for $21.8 million. EPL acquired its stake in the block as part of the Anglo Suisse deal in February 2011. As operator, the transaction enables EPL to consolidate its working interest in the field. Earlier in the year, W&T Offshore noted plans to sell certain non-core, Gulf of Mexico Shelf assets "in an effort to accelerate cash flow from its smaller, less impactful assets," said Global Hunter Securities analysts, noting that similar transactions by the company may continue into early 2014. "We expect cash flow it receives to be redeployed into higher impact exploration projects, such as testing the deeper potential at Mahogany and into additional Permian Basin development activities. We view this transaction as a positive for both WTI and EPL as it allows both parties to better focus their efforts and capital on higher impact, core projects," they concluded.
Pacific Rubiales to acquire Petrominerales
Pacific Rubiales Energy Corp. has agreed to acquire all of the outstanding common shares of Petrominerales Ltd. Petrominerales shareholders will receive Cdn.$11.00 cash for each Petrominerales common share held, for a total value of approximately Cdn.$935 million in cash, plus one common share of a newly formed exploration and production company (ExploreCo), and the assumption of net debt estimated at Cdn.$640 million, including convertible bonds. ExploreCo's assets will consist of Petrominerales' Brazilian exploration assets and Cdn.$100 million in cash. The total purchase price on a fully diluted basis, including assumed net debt, and excluding funding of ExploreCo, will be approximately Cdn.$1.6 billion. The deal will be financed with cash on hand and bank credit facilities including a committed US$1.3 billion short term bank facility, which the company expects to refinance after the acquisition is completed. The cash consideration per Petrominerales share represents a premium of approximately 56% to the 20-day volume-weighted trading price on the Toronto Stock Exchange of Petrominerales as at September 27, 2013.
GGS executes $105M Financing agreement
Global Geophysical Services Inc. has entered into a financing agreement with TPG Specialty Lending Inc. and funds managed by Tennenbaum Capital Partners LLC for a $105 million loan facility. The loan facility will refinance in full its existing revolving credit facility, pay certain related fees and expenses, and provide access to additional capital for potential future transactions. The agreement provides for an $82.8 million Term A Loan and a $22.2 million Term B Loan. The Term A Loan will be fully drawn at closing to refinance the existing credit facility and to pay fees and expenses. The loans bear interest at a rate of LIBOR plus 9.75% (subject to a LIBOR floor of 1%) with a maturity date of Sept. 30, 2016. The Term B Loan is intended to support possible future transactions. At closing, no amounts were drawn on the Term B Loan. Bank of America Merrill Lynch acted as financial advisor.