Houston, TX-based Midstates Petroleum Co. Inc. (NYSE: MPO) has agreed to purchase Anadarko Basin assets in Texas and Oklahoma from Panther Energy for $620 million.
Assets in the sale included developed and undeveloped acreage from Panther Energy, a consortium of Panther Energy LLC, Red Willow Mid-Continent LCC, and LINN Energy Holdings LLC. Both Panther Energy LLC and Red Willow Mid-Continent LLC are subsidiaries of the Southern Ute Indian Tribe Growth Fund.
Highlights of the transaction include:
- Adds approximately 36.4 million barrels of oil equivalent (MMboe) proved reserves that are 45% oil and 21% natural gas liquids (NGLs), of which 34% are proved developed producing
- Increases net current daily production by approximately 8,000 boe per day (67% liquids)
- Enhances drilling inventory with over 700 low-risk, repeatable horizontal drilling opportunities
- Expands acreage position with approximately 140,000 net acres with multiple objectives; about 102,000 are in Texas and 38,000 are in Oklahoma; 60% of total acreage is held by production
- Adds approximately 280 gross producing wells that are over 80% operated with an average 69% working interest and 55% net revenue interest
- Provides more than 100 Mmboe in internally estimated resource potential
- Immediately accretive in 2013 to cash flow per share, as well as earnings, EBITDA, proved reserves and production per share
“Proved reserves of 36.4 MMboe and current daily production of 8,000 boe/d (67% liquids) imply transaction metrics of $17/boe of proved reserves and $78k/boe/d of current production,” said Baird Equity Research analysts in a note to investors Thursday.
Baird analysts cover master limited partnerships in the oil and gas space and noted that the transaction, in their view, is “marginally de-risking,” to LINN Energy, who held a 40% interest in the assets. The divested properties, they continued, “have a steeper decline rate as compared to LINE’s total portfolio and reduce non-op exposure to a new player in the region, who intends to double the capex budget on the properties.”
John Crum, Midstates chairman, CEO and president commented, “Adding this new third focus area provides Midstates the opportunity to build upon our operational strengths and leverage our presence in the Mid-Continent region that we established last year in Tulsa after completing our Mississippian Lime acquisition. The Anadarko Basin is well understood by our team and the industry and will enhance Midstates’ overall investment profile. Returns on the wells in this region are very attractive and the operating costs are comparable to our existing cost structure.”
Primary drilling targets on the properties acquired include the Cleveland, Marmaton, Cottage Grove, and Tonkawa formations with potential upside from drilling the deeper lower Pennsylvanian and Mississippian sections. By late summer, Midstates plans to run a six-rig program in the area with three to four rigs drilling for the Cleveland formation and two to three drilling for the Marmaton, Cottage Grove and Tonkawa formations.
During 2013, Midstates expects to drill approximately 40-45 wells on the newly acquired acreage, all of which will be horizontal wells. Drilling and completion costs have averaged approximately $3.0 million per horizontal well which have been drilled to an average vertical depth of 6,000 to 8,000 feet with 4,000 to 4,300 foot laterals and 15 to 17 stages of fracture stimulation.
In connection with the acquisition, Midstates has secured $620 million in bridge loan commitments from Morgan Stanley Senior Funding Inc. and SunTrust Robinson Humphrey Inc. Midstates intends to permanently finance the acquisition by raising $725 to $750 million of which $100 to $125 million would be equity, pending market conditions, and the balance would be debt. Additionally, Midstates has also received commitments from SunTrust Robinson Humphrey Inc. and Morgan Stanley Senior Funding Inc. to increase the borrowing base under the company’s revolving credit facility to $425 million at closing of the transaction.
Morgan Stanley & Co. LLC and SunTrust Robinson Humphrey Inc. acted as financial advisors to Midstates in connection with the transaction.
The transaction will be effective April 1, 2013 and closing is expected on or about May 31, 2013, subject to customary closing conditions.