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Atlas Resource Partners To Enter Eagle Ford Shale Through Acquisition Of Oil Rich Production And Undeveloped Locations

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-- Atlas Resource Partners, L.P. (ARP) to acquire 12 Mmboe of oil-rich reserves in the Eagle Ford Shale for $225 million
-- The oil production is expected to significantly increase distributable cash flow and further improve distribution coverage and leverage ratios
-- Undeveloped drilling locations to be acquired in the Eagle Ford are expected to provide valuable inventory for the Company's investment partnership business
-- The relationship with the E&P development subsidiary of Atlas Energy allows the Company to enter into this transaction

Atlas Resource Partners, L.P. (NYSE: ARP) ("ARP" or "the Company") announced today that it has entered into a definitive agreement to acquire oil assets in the Eagle Ford Shale in south Texas for $225 million. The assets consist of 22 producing wells and 19 undeveloped locations containing estimated net reserves of approximately 12 million barrels of oil equivalent ("Mmboe"). ARP's Board of Directors has approved the transaction, which is expected to close in the fourth quarter 2014 with an effective date of July 1, 2014. The Company will pay $200 million of the purchase price upon closing, subject to customary purchase price adjustments, with the remainder of the purchase price paid in installments in 2015.

In connection with the acquisition, Atlas Energy, L.P.'s (NYSE: ATLS) E&P development subsidiary will purchase eight wells that have been drilled but not completed and 53 undeveloped drilling locations for approximately $115 million, which is to be paid in the twelve months following closing.

Edward E. Cohen, Chief Executive Officer of ARP, stated, "This transaction demonstrates the ability of the Atlas companies to acquire high-margin production in a premier U.S. oil and gas basin without diluting common unit holders' interests. We expect this transaction to immediately enhance ARP's cash flow, distribution coverage and credit metrics, providing additional visibility and growth."

ARP will acquire oil-rich production in Atascosa County, TX, located in the oil window of the Eagle Ford Shale. The production is comprised of approximately 87% oil, 7% natural gas liquids and 6% natural gas from 22 producing wells, from which the Company expects net daily production to average approximately 1,900 barrels of oil equivalents per day ("boe/d") in 2015. ARP's oil and liquids production is expected to increase as a result of the acquisition to approximately 25% of ARP's total daily oil and gas production. In addition to the oil-producing assets, ARP will acquire 19 undeveloped drilling locations in the Eagle Ford position. The Company expects that these drilling locations will provide valuable inventory for ARP's investment partnership business. The Eagle Ford assets also have contracted agreements for gathering and processing capacity as well as salt water disposal.

Additional operating details of the assets to be acquired by ARP:

  • Net reserves of approximately 12 Mmboe; approximately 86% oil; 100% operated, 100% working interest (74% net revenue interest)
  • Expected net daily production in 2015 of approximately 1,900 boe/d from 22 producing wells in Atascosa Co., TX
  • ARP expects the entire acreage position to be held by production in the several quarters following the closing of the transaction
  • Lease operating costs and production taxes of approximately $9.75 per barrel ("bbl")
  • Oil transportation costs of approximately $7.00/bbl; gas gathering and processing costs of approximately $1.70 per million cubic feet

ARP intends to finance a portion of the transaction through borrowings under the Company's revolving credit facility. ARP will pay $200 million upon closing the transaction, subject to purchase price adjustments, and the remaining $25 million will be paid in three quarterly installments beginning March 31, 2015. The Company is also currently working with its lending group to expand the borrowing base on its revolving credit facility as a result of the transaction.

Morgan Stanley and Co. LLC acted as financial advisor on the transaction, and Jones Day and Ledgewood (Philadelphia) acted as legal advisors.

Posted-In: News M&A Press Releases

 

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