INDUSTRY BRIEFS

Diamondback enters Delaware Basin

Diamondback Energy Inc. has entered into a definitive purchase agreement with an unrelated third party seller to acquire leasehold interests and related assets in the Southern Delaware Basin for an aggregate purchase price of $560 million. The deal includes 38,765 gross (19,180 net) surface acres primarily in Reeves and Ward counties and approximately 1,000 boe/d of current net production based on seller data. Net proved developed reserves, based on Diamondback's internal estimates as of July 2016, were approximately 2.2 MMboe. Diamondback believes that development potential within the footprint of the acquisitions includes 290 net horizontal locations, based on 880-foot inter-lateral spacing in the Wolfcamp A and B and 1,320-foot inter-lateral spacing in the 2nd and 3rd Bone Spring. Existing saltwater disposal and gathering infrastructure along with other assets are valued at $10 to $15 million. Diamondback is increasing its 2016 production guidance to a range of 38.0 to 40.0 Mboe/d, up 11% from the midpoint of the February guidance range of 32.0 to 38.0 Mboe/d. The company now intends to complete 60 to 75 gross horizontal wells this year, up from the midpoint of the prior range of 35 to 70 gross horizontal wells. In conjunction with increased completions, the company is increasing its 2016 capital expenditure guidance to $350 to $425 million from the prior range of $250 to $375 million. Richard Tullis, senior analyst, Oil & Gas Exploration & Production at Capital One Securities said the "deal metrics work out to ~$26K/acre after adjusting for the ~1.0 Mboe/d of associated production (we value at $42MM) and ~$12MM for infra assets. The acquisition will be funded with cash (exited 1Q16 with ~$236MM) and a 5.5MM share equity offering, which represents ~9% dilution (including 825K green shoe shares) of existing 71MM share count. We believe the acreage could be worth ~$35K acre if FANG is able to drill 290 net locations (as referenced in the press release) based on our estimate of 650 Mboe wells costing $7.0MM per well. We also see the acquisition as a positive given cost of entry compared to the ~$47K/acre FANG currently trades at adjusted for production & VNOM ownership."

Laredo acquires Midland Basin acreage

Laredo Petroleum Inc. signed a purchase and sale agreement for additional acreage within the company's existing footprint in the Midland Basin for $125 million, subject to customary closing price adjustments. The acquisition secures additional rights to the Spraberry interval, enables the drilling of additional 10,000-foot or longer locations, facilitates the new Western Glasscock production corridor and increases the company's working interest in current leasehold in western Glasscock and Reagan counties, Texas. The acquisition adds approximately 9,200 net acres, of which approximately 6,300 are in the Spraberry interval and approximately 2,900 net acres are in the Spraberry, Upper, Middle and Lower Wolfcamp, Canyon and Cline zones. The purchase includes approximately 300 net barrels of oil equivalent per day of Laredo-operated production from existing vertical wells through increased working interest in the wells. The acreage bolts on directly to current drilling units and further enables the development of the acreage with 10,000-foot or longer laterals. On July 13, 2016, the company closed a portion of this acquisition for approximately $92.7 million. The closings on the remaining interests, which are subject to certain preferential purchase rights and consents, are expected to occur as such rights and consents are satisfied or obtained.

IHS, Markit complete merger

IHS Inc. and Markit Ltd. Have completed their previously announced merger to form IHS Markit (Nasdaq: INFO), a provider of critical information, analytics and solutions. HIS Markit began trading under the trading symbol "INFO" on the Nasdaq Global Select Market. In accordance with the terms of the merger agreement, IHS stockholders will receive 3.5566 common shares of Markit (now renamed IHS Markit) in exchange for each share of IHS common stock, which will no longer be publicly traded. The combined company's reported results for fiscal year 2015 include approximately $3.3 billion in revenue, $1.2 billion in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), and $800 million in free cash flow.

ArcLight partners with LOGOS Resources

Private equity funds managed by ArcLight Capital Partners LLC recently closed a $150 million commitment to back LOGOS Resources, a developer of oil and natural gas production assets in the San Juan Basin. The commitment represents ArcLight's second partnership with LOGOS, following its original investment in 2012. The commitment to LOGOS, which also includes commitments from the LOGOS management team and Consolidated Asset Management Services (an ArcLight affiliate), will be used to pursue acquisitions primarily in the San Juan Basin and enhance development of LOGOS' existing acreage position. Concurrent with the new commitment, LOGOS completed the acquisition of San Juan Basin assets consisting of approximately 129,000 net acres and net production of approximately 38 MMcfepd. Including existing assets owned by LOGOS, the company now consists of approximately 143,000 net acres and net production of approximately 46 MMcfe/d.

Ritchie completes acquisition, investment

Ritchie Bros., a large industrial auctioneer and a equipment distributor, has completed its acquisition of the outstanding minority interest of Ritchie Bros. Financial Services (RBFS), and has made a strategic investment in Machinio Corp. - a global search engine for finding, buying and selling equipment. Ritchie Bros. acquired the outstanding 49% minority interest in RBFS for cash consideration of CAD$53.9 million (US$41.1 million). Additional compensation may be provided to the former shareholders of the minority interest, contingent upon certain operating performance targets being achieved over the next three years. Jim Case will continue leading the business as it executes its growth strategy. In 2015, RBFS received more than US$1 billion of credit applications and facilitated US$222 million in equipment financing for Ritchie Bros. customers - representing 31% growth in funded loans compared to 2014, and 116% growth compared to 2013. RBFS acts as an intermediary with select lending partners to find financing solutions for customers purchasing equipment, including loans and lease-to-own programs. RBFS does not utilize Ritchie Bros. capital in its financing activities. Also, the company made a minority investment in Machinio Corp. Ritchie Bros. was the lead investor in a Series A round of financing, raising gross proceeds of $3.0 million for Machinio. All other terms of the minority investment are confidential. Machinio, based in Chicago, continues to operate as an independent business.

Zahroof Valves secures funding

Houston, TX-based Zahroof Valves Inc. (ZVI), has secured Series C funding led by Saudi Aramco Energy Ventures (SAEV), the corporate venturing arm of Saudi Aramco. Existing investor NGP Energy Technology Partners (NGP ETP) also participated in the financing. "The Straightflo Valve's patented technology delivers a step change in reciprocating compressor performance, serviceability and reliability while reducing greenhouse gas emissions to the environment," said Zahroof Mohamed, president and chief technology officer at ZVI. Established in 2010, ZVI focuses on improving the performance of reciprocating compressors through its compressor valve. The ZVI Straightflo Valve, developed by Zahroof Mohamed, is a direct "drop-in" replacement for all manufacturers' compressor valves and can be operated in most compression applications. These include natural gas gathering, production, transmission and storage; CNG; FPSO; CO2 Enhanced Oil Recovery; H2 and others. In addition to its 10-year warranty, the ZVI Straightflo Valve has been shown to improve valve efficiency by up to 40% and significantly extend run time between valve service intervals by more than a factor of 5X.

Woodside to acquire Senegal interests from ConocoPhillips

Woodside has entered into a binding Purchase and Sale Agreement (PSA) with ConocoPhillips to acquire all of ConocoPhillips' interests in Senegal for the purchase price of US$350 million, based on an effective date of January 1, 2016, plus a completion adjustment of approximately US$80 million. Under the PSA, Woodside will acquire 100% of the shares in ConocoPhillips Senegal BV which holds a 35% working interest in a Production Sharing Contract with the Government of Senegal covering three offshore exploration blocks, Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore. The acquisition includes the option for Woodside to operate the future development of any resource. The Production Sharing Contract includes the SNE and FAN deep water oil discoveries. SNE is one of the largest global deep water oil discoveries since 2014. Woodside estimates that the SNE discovery contains 560 MMbbl of recoverable oil (at the 2C confidence level, 100%). Completion of the PSA is subject to satisfaction of customary conditions, including Government of Senegal approval and pre-emption and is targeting close by year-end 2016.

Baker Hughes enters new $2.5B credit facility

Baker Hughes Inc. announced a new five-year $2.5 billion revolving credit facility to replace its $2.5 billion facility expiring in September. On July 13, 2016, the oilfield services provider entered into a new credit agreement among the company, as borrower, JPMorgan Chase Bank NA, as administrative agent, Citibank NA, as syndication agent, and other agents and lenders. The Bank of Tokyo-Mitsubishi UFJ, Ltd., DNB Bank ASA, New York Branch, Goldman Sachs Bank USA, HSBC Bank USA, National Association and Wells Fargo Bank, National Association acted as documentation agents, JPMorgan Chase Bank NA and Citigroup Global Markets Inc. acted as co-lead arrangers and joint bookrunners and The Bank of Tokyo-Mitsubishi UFJ Ltd., DNB Markets Inc., Goldman Sachs Bank USA, HSBC Bank USA NA, and Wells Fargo Securities LLC acted as co-arrangers and joint bookrunners. The 2016 credit agreement expires in July 2021. If drawn, proceeds from the 2016 credit agreement are expected to be used for general corporate purposes. In an investors' note after the news, Raymond James analysts said the new facility terms appear "relatively in line with the old facility in terms of capacity." There is one financial covenant, the analysts noted, "a maximum total debt to cap of 60%, which should not be a concern given Baker Hughes's current 16% ratio. Bottom Line: We had expected Baker Hughes to replace the facility this year, and had not expected any difficulties given the company's strong financial position."

Bill Barrett closes Uinta asset divestiture

Bill Barrett Corp. has closed on the previously announced sale of non-core assets located in the Uinta Basin for net cash proceeds of approximately $30 million. The proceeds from this transaction will be used for general corporate purposes and to enhance the company's liquidity position. The company's "ample liquidity" provides the company with "ample optionality," Wunderlich Securities Inc. analysts said in a note following the news. "BBG has such strong optionality due to its $100+ million cash balance, $30 million in recently closed asset sale proceeds and the undrawn $335 million credit facility. This financial firepower gives the company the ability to look at resuming drilling activity and/or reducing bond debt when appropriate; and we think investors have not given the company enough credit through the downturn for building and maintaining such an enviable position," the analysts continued. Wells Fargo Securities LLC acted as the company's advisor on this transaction.