INDUSTRY BRIEFS

PDC Energy acquires private companies to enter core Delaware Basin

PDC Energy Inc. has agreed to acquire two privately held companies, giving PDC access to approximately 57,000 net acres in Reeves and Culberson Counties, Texas with an average working interest of 93%. PDC Energy will pay approximately $1.5 billion for the two companies, both backed by private equity firm Kimmeridge Energy Management Company, subject to due diligence and certain customary closing conditions. Approximately 41,000 net acres are set in Reeves County and another 16,000 net acres are located in Culberson County. Current net production is approximately 7,000 boe/d (42% oil and 65% liquids) from 21 horizontal wells, with two additional wells in the completion and flowback phase. With a deal price close to $30K per acre for the Reeves position, the deal is "a wise strategic direction for PDCE, whose stock has been in limbo due to limited "core" running room in the Wattenberg," noted Seaport Global Securities (SGS) analysts after the announcement. OGFJ spoke to PDC Energy in 2010 and again in 2015. During that time, the company had narrowed its focus to include the core Wattenberg. Consideration in the transaction includes approximately $915 million of cash and approximately 9.4 million shares of PDC Energy common stock (valued at approximately $590 million) privately placed to the sellers. PDCE intends to fund the cash portion of the acquisition through potential equity and debt financings prior to closing. Through committed financing from JP Morgan, PDCE has secured incremental liquidity, bringing its current liquidity to approximately $1.4 billion. In the remainder of the year, PDCE plans to spud approximately nine horizontal wells - seven of which have 1.5 or 2 mile laterals - and expand certain midstream infrastructure for an expected total capital outlay of approximately $55 to $65 million. Additionally, the company is finishing completion operations on two horizontal wells and plans to operate two drilling rigs by year-end 2016.

SM Energy adds Permian acreage through $980M acquisition of Rock Oil Holdings

Riverstone Holdings LLC has signed a definitive agreement pursuant to which Riverstone Global Energy and Power Fund V LP (Fund V) and minority partners have agreed to sell Rock Oil Holdings LLC, a Houston- and Denver-based oil and gas company focused in the Permian Basin, to SM Energy Company (NYSE: SM) for $980 million in cash. Since its formation, Rock Oil has entered into a series of acquisitions to establish a position of approximately 24,783 net acres in the Midland Basin component of the Permian. The company, which has been actively executing upon a horizontal development program in Howard County, TX, currently produces approximately 4,900 boe/d. In a note August 8, analysts with Seaport Global Securities said the deal is positive and "borderline transformational," noting that with approximately 47,000 net acres in the Midland Basin, SM Energy "will now start to be comped vs. the Permian pure-play crowd. This positions SM to potentially be re-rated higher given the valuation gap (SM at 5.6x FY17 EV/EBITDA vs. Permian group at ~11x). On this deal specifically, we think ~$32K/acre is a fair price given recent wells trending above 1 MMboe EURs." The Denver, CO-based company will finance the deal by offering 15 million shares of common stock (+2.25 million shoe), "equating to approximately $505 million gross based on [August 5]'s close, along with $100 million of senior convertible notes due 2021." SM Energy plans to run one rig in the acquired acreage in the fourth quarter of 2016 and two rigs throughout 2017. The company has increased its estimate of total capital spend for 2016 by approximately $15 million to $20 million to a range somewhere between $685 million and $690 million. Jefferies served as lead financial advisor to Rock Oil and Riverstone Holdings LLC on the transaction. Petrie Partners also acted as a financial advisor to Rock Oil. Latham & Watkins LLP acted as legal counsel to Rock Oil and Riverstone. The transaction is subject to customary closing conditions and is expected to close in early October.

Newfield to sell Texas assets for nearly $390M

Newfield Exploration Co. has signed two separate purchase and sale agreements to divest substantially all of its assets in Texas for combined net after tax proceeds of nearly $390 million, subject to customary purchase price adjustments. The transactions include Newfield's unconventional assets in the Eagle Ford Shale and its conventional natural gas assets in south and west Texas. Current net daily production from the combined assets is approximately 12,700 BOEPD, of which approximately 35% is oil. The agreement to sell the Eagle Ford package was signed with Protégé LLC. The second agreement for conventional natural gas assets in South Texas was signed with an undisclosed party. BMO Capital Markets and Scotia Waterous acted as financial advisors for these transactions. The transactions, expected to close in the third quarter of 2016, are subject to ordinary closing conditions.

Continental Resources to sell certain SCOOP assets for $281M

As part of its 2Q16 presentation, Continental Resources said it had signed a definitive purchase and sale agreement with an undisclosed buyer to sell approximately 29,500 net acres of non-strategic leasehold in the SCOOP play in Oklahoma for $281 million. Located primarily on the eastern side of SCOOP, predominantly in Garvin and McClain counties, the leasehold represents approximately 550 boe/d of net production and less than 1% of Continental's proved reserves, Raymond James analysts said. Following the transaction's close, Continental will hold approximately 384,000 net acres of leasehold in SCOOP. Both Raymond James and Wunderlich Securities analysts maintain a Buy rating for Continental as it appears well-positioned for an oil price recovery. "Continental is now reducing debt through operations and asset sales as it prepares for a higher commodity price environment in the future. Impressively CLR has been able to reduce its costs/spending to a point that allows the company to generate free cash flow from operations even in the current environment. This has allowed CLR to reduce debt nicely during 2Q16 and that trend should continue in 2H16 given the current spending rates," commented Wunderlich Securities analysts in a note August 8.

Jones signs $136M deal for STACK/SCOOP assets

Austin, TX-based Jones Energy Inc. has signed a definitive purchase and sale agreement to acquire approximately 18,000 net acres primarily in southern Canadian and northern Grady Counties in Oklahoma for $136.5 million. The majority of the assets are in the oil window, and approximately 70% of acreage is operated with an average working interest of approximately 50%. Jones Energy noted an implied acreage value of approximately $7,600 per net acre. Seaport Global Securities commented following the deal's announcement. "Without the benefit of an acreage map, tangible offset well results, and economic projections (well cost, EURs, commodity split, etc.) it's hard to give a thumbs up or down call on this transaction. However, if this acreage - which appears well south of what's considered the epicenter of the STACK core (more Blaine and Kingfisher counties) - proves to look like the STACK core, then this acreage was a steal at $7.6K/acre (management making the claim that it is on trend), in our view. We note with Q2 earnings, CLR sold what it deemed "non-core" SCOOP acreage on the eastern portion of the play for ~$9K/acre, which may be a fair comp to JONE's purchase." To fund the transaction, Jones plans to issue 21 million shares of common stock at ~$2.77/share (plus an underwriter's option for an additional 3.15 million shares) and 1.6 million shares of 8% preferred convertible stock (plus an underwriter's option for an additional 240,000 shares). The company expects to net $132.2 million proceeds from the offering. Credit Suisse Securities (USA) LLC and JP Morgan Securities LLC are acting as joint book-running managers for the offerings. Following the upsized equity offerings, "representing a nearly 40% dilution in share count including the 3.15 million greenshoe," said Capital One Securities analyst Richard Tullis, "our NAV declines by $1 to $5 after factoring in the significant dilution while being partially offset by the potential to drill STACK & SCOOP wells on the 18K net acres being acquired in Canadian & Grady Counties. We currently assign ~$150MM of estimated value for the new acreage based on drilling 1.0 MMboe wells for $6.0MM each (25% oil & 35% NGLs)."

Statoil agrees to sell certain US onshore assets for US$96M

Statoil has agreed to divest some of its non-operated interests in West Virginia to Antero Resources Corp. for approximately US$96 million in cash. The acreage is primarily located in Wetzel, Tyler, and Doddridge Counties and is operated by Southwestern. Statoil's net acreage included in this transaction is approximately 11,500 acres and its average working interest is 19%. The deal follows the announcement by Antero on June 9, 2016 of the acquisition of Southwestern Energy's interest in the same assets. Statoil and Antero have agreed on a price equivalent to that agreed between Southwestern and Antero. The transaction is expected to close by the third quarter of 2016, subject to certain conditions.

U.S. Silica to acquire Sandbox Enterprises

U.S. Silica Holdings Inc. has acquired Sandbox Enterprises LLC, a provider of logistics solutions and technology for the transportation of proppant used in hydraulic fracturing in the oil and gas industry. The transaction was financed using a combination of $75 million of cash on hand and approximately 4.2 million U.S. Silica common shares. Based on the U.S. Silica closing price on Aug. 2, 2016 the transaction is valued at $218.3 million. The acquisition is expected to be modestly accretive to 2016 EPS and generate EPS accretion of $0.20 to $0.30 in 2017. Morgan Stanley & Co. LLC acted as exclusive financial advisor to U.S. Silica Holdings. Piper Jaffray & Co., through its Simmons & Company International division, acted as exclusive financial advisor to Sandbox Enterprises.

Chiron Financial retained by Equity Security Holders Committee of Energy XXI

Chiron Financial, the Houston-based investment banking and financial advisory firm, has been retained as the co-financial advisor to the Official Committee of Equity Security Holders of Energy XXI Ltd. Energy XXI Ltd. and certain of its wholly-owned subsidiaries filed for Chapter 11 bankruptcy protection, in the United States Bankruptcy Court for the Southern District of Texas, on April 14. Energy XXI's operations are focused on the acquisition, exploration, development, and operation of oil and gas natural properties primarily in the US Gulf of Mexico waters and the Gulf Coast onshore. Leading the engagement for Chiron Financial is Scott W. Johnson, managing director and veteran investment banker specializing in corporate finance and restructuring matters. Johnson is a co-founder of Chiron Financial. He has over 30 years of experience in investment banking and energy, with a particular focus on the oil and gas industry.

iLandMan, OGsys integrate land and accounting systems

Oil and gas software firms iLandMan and OGsys Inc. have entered into a developmental business agreement to offer a fully integrated land management and accounting solution for exploration and production companies. The agreement aims to unite land teams and accounting departments through an integrated technical approach, where data meaningful to each side of the company can be appropriately shared between them. "OGsys clients and prospective clients have requested that our firm link seamlessly with iLandMan among others. We've heard many times over that full land-life-cycle management, from leasing, to mapping, to divisions of interest, must be offered in a seamless connection," said OGsys President Chuck Blanton. iLandMan President, Tim Supple, said, "This solution will empower these companies [land departments] to have the most accurate tract and formation-based data in the industry flow directly to a powerful accounting system with ease." A cloud-based OGsys platform, set to offer E&P companies additional accounting and operations management options, is currently in development. iLandMan is the an online, real-time, tract and formation-based lease management software for exploration and production companies. OGsys is a provider of oil and gas accounting software.

S&P Global Platts acquires PIRA Energy Group

S&P Global Platts, an independent provider of information and benchmark prices for the commodities and energy markets, has signed an agreement to acquire PIRA Energy Group, a provider of global energy market analysis. The transaction is subject to regulatory approval and is expected to close in the third quarter of 2016. Financial terms were not disclosed. Founded in 1976, New York-based PIRA provides over 500 energy and commodity customers in 60 countries with a broad range of energy research and forecasting products and services.

API files suit against EPA's final oil and natural gas sector rule

On August 2, American Petroleum Institute (API) filed a lawsuit with the D.C. Circuit Court challenging the Environmental Protection Agency's (EPA) final oil and natural gas sector rule calling for emission standards for new, reconstructed, and modified sources. Specifically, API challenges the EPA's failure to adhere to the specific limitations provided by the Clean Air Act on the way the agency can develop regulations. "Consumers and businesses are seeing significant savings through lower energy costs largely driven by the revolution in US shale energy production. The implementation of duplicative and costly regulations could discourage natural gas production, disrupt our progress reducing emissions, and increase the cost of energy for American consumers," said API managing counsel John Wagner. In addition to API, several industry groups and a coalition of 14 states have filed to sue the EPA, calling on the D.C. Circuit Court of Appeals to assess the EPA's rule on the grounds that the agency has exceeded its statutory authority. API is the only national trade association representing all facets of the oil and natural gas industry.

Rimrock Resource Partners acquires SCOOP assets

Tulsa, OK-based Rimrock Resource Partners LLC has closed a $150 million acquisition of assets from an undisclosed seller. The oil and gas assets cover approximately 24,500 net leasehold acres that are 100% held by production, approximately 2,100 boe/d, and 3,100 net mineral acres located predominately in the Golden Trend portion of the SCOOP play. In October 2015, Rimrock announced a $75 million funding commitment from Houston, TX-based private equity firm Post Oak Energy Capital and Ceja Corp. At that time, Rimrock owned approximately 2,400 net leasehold acres. Post Oak and Ceja subsequently increased their funding commitment. "We are very excited to announce this transaction," said Burt Williams, CEO of Rimrock. "Since last October, we have grown our position to over 6,000 net acres, so with this acquisition Rimrock will own over 30,500 acres prospective for Woodford, Springer and Sycamore across 150 mostly contiguous sections."

Maverick Drilling & Exploration testing divestment waters for Blue Ridge Field assets

Maverick Drilling & Exploration Ltd. opened a data room to test the divestment of its producing oil properties in the Blue Ridge field, a piercement-type salt dome located south of Houston, Texas. Maverick has nearly 100% working interest in approximately 700 acres that are currently producing an average 500 gross barrels of oil per day. The company has engaged the Oil & Gas Asset Clearinghouse, a broker-dealer and A&D advisory firm in Houston, to assist in the potential sale. The small working interest in the field not owned by Maverick will also be marketed. "To enhance our liquidity and help us develop our newly acquired acreage in the Eagle Ford formation in South Texas, we have decided to test the viability of selling our legacy oil properties in the Blue Ridge field," said J. Michael Yeager, executive chairman and CEO of Maverick.

Trellis launches as standalone company

Trellis Energy, formerly a part of global IT services and business consulting firm Blackstone Technology Group, has launched as a separate corporate entity, wholly owned by Blackstone. The new firm will continue to provide the Trellis™ natural gas transaction management platform that manages energy transactions and automates processes in natural gas production, gathering, and various delivery from pipeline to storage and end users behind city gate including gas supply planning and optimization. The company will also absorb Blackstone's Digital Services practice to provide energy companies with software and services in the areas of Big Data Analytics, Mobile, Cybersecurity and the Grid of Things. Trells Energy is led by newly-appointed CEO and president Rakesh Agrawal.

Blackeagle Energy Services acquires Brazos Rock's Permian Basin assets

Berthoud, CO-based Blackeagle Energy Services, a provider of energy-related construction and maintenance services, has acquired certain Permian Basin assets from Weatherford, TX-based Brazos Rock Inc., a provider of oilfield construction services in Texas. The terms of the deal remain private except for the public announcement that Blackeagle will employee Brazos Rock's former employees and occupy the company's building and yard in Midland, Texas.