Atlas Resource Partners, L.P. to Acquire Long Lived, Low Decline Natural Gas Production for $733 Million
Atlas Resource Partners, L.P. (ARP) to acquire 466 Bcf of natural gas proved reserves from EP Energy for $733 million; assets are 93% proved developed and are expected to be immediately accretive to distributable cash flowARP provides full year 2014 distr
Atlas Resource Partners, L.P. (“Atlas”) (NYSE: ARP) announces today that it has entered into a definitive agreement to acquire approximately 466 Bcf of natural gas proved reserves in the Raton (New Mexico) and Black Warrior (Alabama) Basins from EP Energy E&P Company, L.P. (“EP Energy”), a wholly owned subsidiary of EP Energy LLC, for $733 million. The transaction, which is expected to close in the third quarter 2013 and is subject to purchase price adjustments, will have an effective date of May 1, 2013.
As a result of the EP Energy acquisition, ARP is providing full year 2014 distribution guidance of at least $2.60 per unit. The transaction is expected to be immediately accretive to distributable cash flow. This represents approximately a 27% increase compared to the current annualized distribution of $2.04 ($0.51 per unit paid for first quarter 2013).
Edward E. Cohen, Chief Executive Officer of ARP, said that, “This acquisition is expected to be directly and positively transformative to ARP and its existing operations. An important goal at ARP is to build stakeholder value through targeted acquisitions: we are determined to continue to execute on this strategy.”
Upon closing, the new EP Energy assets are expected to immediately provide ARP with accretive cash flow from a substantial amount of mature, low-declining natural gas production in various regions, primarily in various producing areas including the Raton Basin and the Black Warrior Basin. The acquired properties represent approximately 466 Bcf of natural gas proved reserves, of which 93% are proved developed. The assets currently produce approximately 119 MMcfd of natural gas, which nearly doubles ARP’s existing net production for May 2013. In addition, by agreement with ARP, ARP’s parent, Atlas Energy, L.P. (NYSE: ATLS), will acquire as part of the same transaction approximately 45 Bcf of natural gas proved reserves in the Arkoma Basin (southeastern Oklahoma) from EP Energy for approximately $67 million.
Matthew A. Jones, President and Chief Operating Officer of ARP, added, “These newly acquired assets will be a strong complement to our existing high quality oil and gas portfolio. Through this acquisition, these new positions will provide substantial low decline proved developed reserves to our operations, allowing us greater ability to grow our business through organic development. We look forward to operating in these new areas for our company, and especially with our new employees that will be joining the Atlas team.”
Details of the Acquired Assets:
466 Bcf of proved reserves; 100% natural gas, 93% proved developed
Raton Basin: 320 Bcf of proved reserves
Black Warrior Basin: 141 Bcf of proved reserves
County Line region (Wyoming): 6 Bcf of proved reserves
Current net production of approximately 119 Mmcfd for May 2013
Current annual decline rate of 8-10% on existing production; pro forma company production is expected to reach approximately 11%
Current production costs: lease operating costs of approximately $0.90/mcf; production and ad valorem taxes of approximately 9%; transportation and gathering of approximately $0.35/mcf
Realized natural gas prices represent NYMEX less a differential of approximately $0.05-$0.15/mcf
ARP plans to fund a portion of its acquisition costs with up to $125 million of ARP Class C convertible preferred units to be acquired by ATLS. The preferred units will be issued at $23.10 per unit and are convertible on a 1:1 basis into ARP common units 12 quarters following the date of issuance, or sooner at ATLS’ discretion. By purchasing the preferred units, ATLS will receive warrants to purchase ARP common units at an exercise price equal to the face value of the Class C preferred units. The number of warrants to be issued will equal 15% of the number of preferred units issued.
To those that can draw inferences and correlations, indirectly it means something.
To those that don't understand the business, industry or land asset valuations for proven
and probable reserves, it means nothing.
It helps to remove the blinders once in a while.