Carrizo Oil & Gas Inc. (NYSE: CRZO) has entered into a definitive agreement to sell a portion of its properties in the Barnett Shale to a subsidiary of Atlas Resource Partners for $190 million in cash.
The sale will have an effective date of January 1, 2012, and is expected to close in late April, subject to customary closing conditions and purchase price adjustments.
The deal builds on the Houston-based company's plan to monetize certain dry gas assets in an effort to focus on its liquids-rich resources. In April of 2011, the company signed an agreement to sell nearly all of its Barnett Shale Tier 1 properties to KKR Natural Resources for $104 million. With a protion of the proceeds, Carrizo later added 13,000 acres in the Eagle Ford Shale to its portfolio for roughly $93 million.
In this most recent sale of Barnett Shale assets, the buyer gains producing properties including 221 gross (approx. 110 net) wells currently producing at an approximate net rate of 35 MMcfe per day (predominantly dry gas).
Estimated total proved reserves associated with the divested properties, as determined by Carrizo's third party engineer at year-end 2011, is approximately 312 Bcfe (comprised of 177 Bcfe of proved developed and 135 Bcfe of proved undeveloped reserves), of which 53 Bcfe are non-operated.
"Our corporate strategy has been to focus our capital expenditures on the highest return plays such as our liquids-rich Eagle Ford and Niobrara properties. We have significantly slowed the pace of development of our dry gas properties in the Barnett Shale due to low natural gas prices," commented Carrizo president and CEO S. P. "Chip" Johnson IV.
"However, we had several strong indications of interest in this quality gas asset and are pleased to be able to announce this sale to Atlas. The resulting increase in liquidity generated by the sale of these properties will increase our flexibility to fund our announced 2012 capital investment plan that is focused on investment in liquids-rich resource plays while maintaining appropriate debt levels on our revolver."
The company intends to use the net proceeds from this sale to repay borrowings under its revolving credit facility and use the excess proceeds to partially fund its 2012 capital expenditures plan, largely in the Eagle Ford play. Carrizo estimates that when its borrowing base is redetermined (scheduled for April) it will be around $300 million.
Credit Suisse and Baker Botts LLP acted as Carrizo's financial adviser and legal adviser on this latest transaction, respectively.