INDUSTRY BRIEFS
ENCANA TO DIVEST HAYNESVILLE ASSETS FOR $850M
Encana Oil & Gas (USA) Inc., a subsidiary of Encana Corp., is selling its northern Louisiana Haynesville natural gas assets to GEP Haynesville LLC (GeoSouthern), a JV formed by GeoSouthern Haynesville LP and funds managed by GSO Capital Partners LP. Total cash consideration to Encana under the transaction is US$850 million. In addition, through the transfer of current and future obligations, Encana will reduce its gathering and midstream commitments by roughly US$480 million. Further, Encana will transport and market GeoSouthern's Haynesville production on a fee for service basis for the next five years.Encana will use the total cash consideration to reduce net debt. During the first half of 2015, Encana's Haynesville assets produced an average 217 MMcf/d, contributed approximately 9% to companywide production and less than 2.5% to Encana's first half operating cash flow, excluding hedges. Encana's Haynesville natural gas assets include approximately 112,000 net acres of leasehold, plus additional fee mineral lands. Collectively, they represent Encana's total position in northern Louisiana. Encana operates approximately 300 wells in the area. Estimated year-end 2014 proved reserves were 720 bcfe of natural gas. "The transaction comps work out to ~$3,900/Mcfepd (~$5,600/Mcfepd if including discounted value of gathering commitment relief) for 217 MMcfpd of production (9% of 1H:15 production, 2% of cash flow), $1.18/Mcfe for 720 bcfe of proved reserves, or $7,600/acre for 112K acres," noted analysts with Global Hunter Securities. The analysts view the deal as "in line/positive" as Encana reduces the capital allocated for non-core assets. The analysts believe additional divestitures could include San Juan and DJ Basin assets. Jefferies LLC, Credit Suisse and Gordon Arata McCollam Duplantis & Eagan LLC advised Encana. GeoSouthern was advised by Kirkland & Ellis and Thompson & Knight. The sale is expected to close in 4Q15.
WHITE MARLIN BUYS CERTAIN DUNE ENERGY ASSETS
White Marlin Oil and Gas Company LLC, a Houston, Texas-based privately held upstream oil and gas production company, has closed its acquisition of certain properties from Dune Energy Inc., Dune Operating Company, and Dune Properties Inc. The Dune assets were purchased in a sale pursuant to Section 363 of the United States Bankruptcy Code after Dune filed voluntary petitions for relief on March 8, 2015 under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Western District of Texas, Austin Division. The closing of the asset sale followed the July 10, 2015 Bankruptcy Court Order approving the sale of certain Dune assets to White Marlin pursuant to the terms of the Purchase and Sale Agreement (PSA) by and between Dune and White Marlin dated June 24, 2015. White Marlin purchased Dune's interests in the following 11 fields: Abbeville North, Bayou Couba, Chocolate Bayou, Comite, Lake Boeuf SW, Leeville, Los Mogotes, Malo Domingo, Manchester SW, Manchester W, and Toro Grande. For the assets White Marlin paid $19 million. White Marlin estimates the assets were producing approximately 626 boepd net as of the July 1, 2015 effective date of the transaction. Baker & McKenzie LLP represented White Marlin in the acquisition process. White Marlin Oil and Gas Company, LLC is a wholly owned subsidiary of White Marlin Energy Partners LLC, a portfolio company of the private equity firm Parallel Resource Partners.
IOG CAPITAL CLOSES $185M IN DEVELOPMENT COMMITMENTS IN RESOURCE PLAYS
IOG Capital LP has closed three separate development capital commitments that total $185 million in the last 60 days. IOG's joint development agreement with a privately held Oklahoma-based operator will provide the firm with its first entry into an area of the Anadarko Basin. IOG's $60 million commitment will fund the development of wells over the next two years. Additionally, IOG is working with a private working interest owner to provide funding for well proposals from various operators to develop wells in the core of the Bakken and Three Forks shale plays. IOG will fund up to $25 million over the next 12 months. IOG completed these two transactions in addition to the $100 million Eagle Ford joint development agreement IOG Capital closed on July 27 with Lonestar Resources Ltd.
RSP PERMIAN CLOSES BOLT-ON ACQUISITIONS
RSP Permian Inc. closed acquisitions of, or entered into definitive agreements to acquire, mostly contiguous, bolt-on properties in existing core operating areas in the Midland Basin for an aggregate purchase price of $274 million. Analyst Irene O. Haas of Wunderlich Securities reflected on the transaction price. At approximately $83,000 per flowing Midland barrel, she commented, the result is a $25,000 per net acre price. "While the price seems high, we consider it fair given that the acreage is in a prime location, perfectly bolted-on, 100% held by production, and 100% operated," she said, noting the acreage contains five productive zones and 162 net locations. Approximately $65 million of the acquisitions have already been completed and funded through a combination of cash on hand and a $50 million borrowing under RSP Permian's $500 million revolving credit facility. RSP has also offered to purchase other working interest partners in the properties that could increase the aggregate purchase price of the acquisitions by roughly 10-15%. RSP expects to finance the purchase price of the remainder of the acquisitions with borrowings under its current revolving credit facility, or, to the extent the company deems market conditions favorable, the proceeds of one or more capital markets transactions.
PINE BROOK BACKS RED BLUFF WITH $300M
Investment firm Pine Brook has provided a $300 million line of equity investment in Red Bluff Resources Holdings LLC. Red Bluff is a newly formed energy company focused on acquiring, exploring, and developing onshore crude oil and natural gas reserves in the US Mid-Continent and Permian basins. Headquartered in Oklahoma City, Oklahoma, Red Bluff is led by CEO Timothy Haddican, who, most recently, was an initial member and vice president of operations and engineering with RKI Exploration & Production. Rivington Holdings LLC, and its affiliate, Rivington Securities LLC served as exclusive financial advisor, and Crowe & Dunlevy served as legal counsel to Red Bluff. Vinson & Elkins LLP acted as legal counsel to Pine Brook.
PENN VIRGINIA ENGAGES JEFFERIES AS EXCLUSIVE FINANCIAL ADVISOR
Penn Virginia Corp. has engaged Jefferies LLC to provide financial advice generally and to act as its exclusive financial advisor in connection with asset-level financing transactions with investors related to the company's Eagle Ford assets. Jefferies will also help the company evaluate strategic alternatives with respect to its Eagle Ford assets and their development and will provide the company with other financial advice and financial planning assistance. As of October 2014, PVA had approximately 145,500 gross (approximately 104,300 net) acres in the volatile oil window of the Eagle Ford Shale play in Gonzales and Lavaca Counties, Texas. The move comes as the Radnor, PA-based company tries to increase liquidity as oil markets remain depressed. In July, the company agreed to sell its East Texas assets to an undisclosed buyer for gross cash proceeds of $75 million. Following that announcement, Robert Du Boff, an analyst at Oppenheimer, commented on remaining constraints for the company. "Despite the East Texas proceeds, we believe the company still has too much leverage to efficiently capitalize on a good Eagle Ford acreage position," he said.
SANDRIDGE ENERGY TO REPURCHASE AND EXCHANGE $525M IN SENIOR DEBT
SandRidge Energy Inc. has entered into privately negotiated purchase and exchange agreements under which it will repurchase $250 million aggregate principal amount of its senior unsecured notes for $94.5 million cash and exchange $275 million of notes into new convertible notes.Outlining the plan, Global Hunter Securities analysts said, "The process of rebuilding the balance sheet continues at SD as the company is repurchasing debt at a substantial discount and exchanging other debt for convertible notes. SD will retire $250MM in face value of debt at a price of $94MM and eliminate ~$19MM in interest expense annually. The $275MM in exchanged notes will convert into SD equity at a price of $2.75 initially." Specifically, the company will repurchase $29.3 million aggregate principal amount of its 8.75% senior notes due 2020, $111.6 million aggregate principal amount of its 7.5% senior notes due 2021, $26.1 million aggregate principal amount of its 8.125% senior notes due 2022, and $83 million aggregate principal amount of its 7.5% senior notes due 2023 for an aggregate of $94.5 million in cash. The company will exchange $15.9 million aggregate principal amount of the 2020 outstanding notes, $40.7 million aggregate principal amount of the 2021 outstanding notes, $101.8 million aggregate principal amount of the 2022 outstanding notes, and $116.6 million aggregate principal amount of its 2023 outstanding notes for $158.4 million aggregate principal amount of its new 8.125% convertible senior notes due 2022 and $116.6 million aggregate principal amount of its new 7.5% convertible senior notes due 2023. In addition, SandRidge and its banks amended its first lien revolving credit agreement to facilitate the repurchase and exchange transactions.
SUNDANCE CLOSES ON ACQUISITION OF NSE'S US AND COOPER BASIN ASSETS
Sundance Energy Australia Ltd. has closed its acquisition of New Standard Energy Ltd.'s US and Cooper Basin assets. Consideration for the acquisition included $15 million to repay NSE's note with Credit Suisse, the issuance of 6 million new fully paid ordinary SEA shares and the assumption of net working capital deficit of $0.9 million. Approximately 1.5 million of the 6 million SEA shares will be held in escrow until resolution of due diligence defect matters. The Eagle Ford assets acquired include approximately 5,500 net acres in Atascosa County, Texas, seven gross producing wells with approximately 175 net boe/d of current production and two wells that have been drilled but not yet completed. This acquisition increases Sundance's Eagle Ford position to approximately 37,000 net acres. Sundance plans to sell 25% of the assets acquired from NSE plus approximately 400 net acres (25%) of Sundance's Charlotte Ranch lease in Atascosa County to Quintanilla Management Co. and expects closing of that transaction to occur within the next several weeks.
BLACK RIDGE FORMS JV WITH MERCED CAPITAL
Black Ridge Oil & Gas Inc. has signed a definitive agreement with Merced Capital to form an entity that will acquire and develop Williston Basin non-operated assets. The joint venture will be funded by Merced with an initial investment target of $50 million. Investments will be subject to Merced approval, and will be managed by Black Ridge. The joint venture assets will be managed by Black Ridge in exchange for a management fee and reimbursement of third-party expenses, and, after certain investor hurdles are met, Black Ridge will receive a share of profits in the venture. Black Ridge will also have the option to co-invest up to 25% on acquisitions and capital expenditures alongside the venture and any such co-investments will reside directly within Black Ridge. Upon the sale of joint venture assets, Black Ridge will also have the option to bid and acquire the assets.
HERCULES PRESENTS REORGANIZATION PLAN
Hercules Offshore Inc. filed a prepackaged plan of reorganization on Aug. 13 under Chapter 11 of the US Bankruptcy Code to continue its financial restructuring. The company anticipates that it will receive court authority to pay employee wages and benefits without interruption and to continue to pay trade creditors and suppliers in the ordinary course of business. The Chapter 11 reorganization is expected to conclude in approximately 45-60 days. The prepackaged plan provides a substantial deleveraging transaction pursuant to which more than $1.2 billion of the company's outstanding senior notes would be converted to 96.9% of new common equity, and $450 million in new debt financing would be provided by those holders of the senior notes who wish to participate on a pro rata basis (with the full amount backstopped by certain members of the steering group of noteholders), which would fully fund the remaining construction cost of the Hercules Highlander and provide additional liquidity to fund the company's operations. The filing follows the completion of the solicitation process of the company's senior noteholders. More than 300 senior noteholders with aggregate holdings in excess of $1.2 billion of senior notes have voted to accept the plan, while only two holders with $320,000 of the senior notes voted against the plan. Hercules Offshore has sufficient resources and recurring revenue from operations to continue serving its customers. The plan also provides for the company's current shareholders, despite being substantially "out of the money" by approximately $500 million, to have the opportunity to receive a pro rata portion of the remaining 3.1% of the new common equity, as well as certain warrants, subject to the requirements of the plan and court approval.
MONADNOCK RECEIVES $100M FROM KAYNE ANDERSON
Monadnock Resources LLC has received a $100 million equity commitment from Kayne Anderson Energy Funds and members of the management team. Monadnock, a newly formed independent oil and gas company headquartered in Dallas, TX, will target the acquisition and development of oil and natural gas assets in North America. Prior to forming Monadnock, members of management most recently served in senior leadership positions in private companies.