FourPoint Energy LLC has signed an agreement to acquire nearly 250,000 net acres of oil and gas assets in the Western Anadarko region. The company announced the $840 million deal with Chesapeake Exploration LLC and CHK Cleveland Tonkawa LLC in a July 1 statement.
FourPoint signed definitive agreements with Chesapeake Exploration and CHK Cleveland Tonkawa, whose preferred interest owners are funds managed by GSO Capital Partners LP, as well as other third-party investors, and common interest owner Chesapeake Exploration. The deal will comprise three related transactions for a combined purchase price of $840 million, with the assets to be acquired including an interest in approximately 1,500 producing wells primarily in the Cleveland, Tonkawa and Marmaton formations with average daily net production of approximately 21,500 barrels of oil equivalent per day (boe/d) over the 12 months ended April 2015.
The production mix is 7,000 barrels per day (bpd) of oil, 5,000 bpd of natural gas liquids (NGLs) and 57 million cubic feet per day (MMcf/d) of natural gas. The assets cover nearly 250,000 net acres centered in Roger Mills and Ellis counties, Oklahoma. Approximately 95 percent of the leasehold is held by production. FourPoint will assume full operations of the assets at closing which is anticipated to be August 31, 2015.
“The acquisition complements FourPoint’s current acreage footprint and boosts our inventory by adding a significant amount of operated, oily locations in formations largely unrepresented in our current portfolio,” said George Solich, president and CEO of FourPoint. “Additionally, the assets to be acquired include a large base of production which strengthens our cash flow profile in this uncertain commodity price environment. The acquired assets will be instrumental in our ongoing efforts to build a world class portfolio of oil and gas assets in the Western Anadarko Basin.”
The acquisition will be funded by $619 million in FourPoint Holdings equity issued to funds managed by GSO Capital Partners and cash drawn from existing FourPoint Energy credit facilities.
“The structure of this transaction strengthens FourPoint’s balance sheet and provides significant liquidity to pursue future development and acquisition activity,” said Tad Herz, executive vice president and CFO. “The new equity issued to GSO Capital Partners as consideration for the transaction allows FourPoint to maintain a balanced debt to equity capital structure and allows for GSO to share in future upside potential on the assets.”
Pro forma for the acquisition and prior to customary post-closing adjustments, FourPoint’s Western Anadarko footprint will exceed 400,000 net acres with net production estimated at 260 MMcf/d from approximately 4,600 gross wells, with half of the production coming from oil and natural gas liquids.
“Chesapeake has developed this asset by drilling and completing over 190 horizontal wells since 2012,” said Kamil Tazi, executive vice president and COO. “Anticipating this transaction, Chesapeake halted its development plans and eliminated the active rigs working in this area in the first quarter of 2015. As FourPoint assumes operations, we plan to build back up to their previous momentum and continue to reduce drilling and completion costs while maximizing ultimate recoveries. FourPoint is eager to leverage the knowledge that Chesapeake has developed through their drilling program with our extensive technical expertise in the area to position the company to grow production and cash flow.”
Jefferies LLC acted as financial advisor and Andrews Kurth LLP acted as legal advisor to FourPoint Energy in connection with the transactions. FourPoint is a privately held acquisition, exploration and production company headquartered in Denver, Colorado. Join our team at .Tags: Chesapeake Exploration, FourPoint Energy, mergers and acquisitions, Western Anadarko Basin