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INDUSTRY BRIEFS

Energy XXI to acquire EPL

Energy XXI has agreed to acquire and EPL Oil & Gas Inc. for $2.3 billion, including the assumption of debt. The friendly 65%/35% cash/stock deal would see EPL stockholders receive $39.00 per EPL share based on Energy XXI's closing price as of March 11, representing a 37% premium to the 30-day average closing price of EPL shares and a 34% premium over the closing price of EPL shares on March 11. The resulting company, to remain headquartered in Houston and led by Energy XXI chairman and CEO John Schiller, is expected to see production of approximately 65,000 boe/d with 70% oil. Aggregate consideration for the acquisition amounts to $1billion in cash and roughly 23.4 million EXXI shares. EXXI has received commitments to increase its corporate revolver from $1.0875 billion currently to $1.675 billion, as well as a $400 million unsecured bridge loan to augment the available revolver if EPL's bonds are repurchased. Energy XXI would anticipate retiring any bridge loan through the future issuance of high-yield notes. EPL owns working interests in 37 producing fields, mainly concentrated within nine core producing areas: an estimated 91% of proved reserves, 88% of production and 91% of revenues are associated with the Ship Shoal, East Bay, South Timbalier, South Pass 78 and 49, West Delta, Main Pass, Eugene Island and South Marsh complexes. EPL operates 90% of its properties, by reserves, similar to Energy XXI's 94%. Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC acted as financial advisors to Energy XXI and each rendered a fairness opinion.

Vinson & Elkins LLP acted as legal advisor to Energy XXI. Barclays acted as financial advisors to EPL and rendered a fairness opinion. Sidley Austin LLP acted as legal advisor to EPL.

Talisman completes $1.3B Montney deal

Talisman Energy Inc. has completed the sale of approximately 127,000 net acres of its Montney position in northeast British Columbia to Progress Energy Canada Ltd. for a total cash consideration of $1.3 billion (C$1.5 billion). The company announced the transaction in November 2013, and its closure, coupled with other previously announced deals, marks over $2 billion in dispositions in 12 months. The company aims to divest an additional $2 billion in of long dated, capital intensive assets to help maintain its balance sheet. Talisman retains its Groundbirch and Saturn assets, including approximately 48,000 net acres of prospective Montney land. Jefferies LLC and Scotiabank acted as joint advisors to Talisman.

Arsenal Capital Partners acquires Danlin

Arsenal Capital Partners, a New York-based private equity firm, has acquired Danlin Industries from Hastings Equity Partners. Headquartered in Thomas, Oklahoma, Danlin provides production chemicals, capillary services and completion chemical solutions to oil & gas exploration and production companies across Oklahoma, Texas, Wyoming, Arkansas, Louisiana, Colorado, New Mexico, Kansas and Utah. On March 10, Arsenal Capital also announced the acquisition of Kel-Tech Inc., a provider of specialty chemicals and related services to production, field stimulation and drilling operations in the Permian Basin. The investment in Danlin and Kel-Tech follows Arsenal's acquisition of Flowchem Ltd., a specialty chemical provider to the pipeline industry. Kirkland & Ellis LLP acted as legal advisor to Arsenal. KeyBanc Capital Markets and Madison Capital Funding LLC provided senior debt financing, and funds managed by Sankaty Advisors and Metropolitan Life Insurance Company provided subordinated debt financing. Simmons & Company International served as exclusive financial advisor to Danlin. Morse, Barnes-Brown & Pendleton, PC served as legal counsel to the shareholders of Danlin.

Sun European affiliate buys ADTI

An affiliate of Sun European Partners LLP has acquired Aberdeen, Scotland-based Applied Drilling Technology International Ltd. (ADTI), an offshore integrated turnkey and project management business focused on well design, construction and completion services primarily in the UK North Sea. The business was acquired from Transocean for an undisclosed value. Established in the UK in 1991, ADTI has managed approximately 370 wells and 180 completions in Northwest Europe, with an emphasis on the UK Continental Shelf (UKCS).

DTI acquires Reamco

Houston, TX-based Directional Rentals Inc., a portfolio company of private equity firm Hicks Equity Partners (HEP), has acquired oilfield services company Reamco Inc. Lafayette, LA-based Reamco manufactures, rents and refurbishes downhole drilling tools and related products used in the drilling industry. Directional Rentals has also been renamed Drilling Tools International (DTI) to more accurately reflect the company's mission of renting, manufacturing and selling drilling tools used in bottom hole assemblies to oilfield services companies, independent directional drillers and exploration companies, both onshore and offshore. Reamco's previous owners, Brent Milam and Ashley Lane, have become shareholders in DTI and have joined the company's management team.

Chesapeake mulls oilfield services spin-off

Chesapeake Energy Corp. subsidiary Chesapeake Oilfield Operating LLC (COO) has filed a Registration Statement on Form 10 with the US SEC. COO currently conducts the operations of Chesapeake's oilfield services division, Chesapeake Oilfield Services (COS). The Form 10 contains a preliminary information statement about the potential terms and conditions of a spin-off of COO to Chesapeake Energy Corp. shareholders. It also provides initial information regarding COO as a stand-alone company, including financial, business, risk factor and management information. Immediately prior to completion of the possible spin-off, COO will convert into a corporation and change its name to Seventy Seven Energy Inc. Chesapeake intends for the spin-off to be tax-free to its shareholders for US federal income tax purposes, other than with respect to any cash received in lieu of fractional shares.Chesapeake has obtained a private letter ruling from the IRS and expects to obtain an opinion of tax counsel regarding the tax treatment of the spin-off. Chesapeake has retained Morgan Stanley & Co. LLC as its financial advisor.

Imperial to sell certain Canadian assets

Imperial Oil Ltd. has reached an agreement to sell its interest in assets located in Boundary Lake, Cynthia/West Pembina, and Rocky Mountain House in Western Canada to Whitecap Resources Inc. for approximately CA$855 million. The transaction is expected to close in May. Located in British Columbia and Alberta, the assets involved in the transaction produced about 15,000 oil-equivalent barrels per day in 2013 on a net before royalty basis. Production is split evenly between oil and gas.

Cardno acquires PPI Group

Professional infrastructure & environmental services consultancy Cardno has acquired the PPI Group of companies (PPI) headquartered in Houston, Texas for US$145 million. PPI provides specialist engineering services to the oil and gas sector in the US, West Africa and Asia Pacific. PPI generated annual revenue of US$133 million and EBITDA of US$21.5 million in the year ended December 31, 2013. Oil, gas and energy clients are now expected to account for roughly 25% of Cardno's annual revenue. PPI's key management is expected to remain active in the company, which will be known as Cardno PPI.

KrisEnergy secures $100M revolving credit facility

KrisEnergy Ltd.'s wholly owned subsidiary, KrisEnergy (Asia) Ltd., has entered into a facility agreement whereby KrisEnergy will be granted a US$100 million revolving credit facility maturing in March 2016 with an option to extend for an additional one year. The facility will be used for the acquisition of hydrocarbon assets, general corporate purposes and working capital requirements. The facility, which is secured by the company's current producing and development assets in the Gulf of Thailand and a producing block in Bangladesh, also contains an option to extend the full amount up to a maximum of US$140 million upon the addition of new hydrocarbon reserves in the proved plus probable (2P) category into the group's portfolio. As of Dec. 31, 2013, KrisEnergy's 2P reserves were 32.3 million boe as estimated by Netherland, Sewell & Associates Inc. The facility was arranged by HSBC.

Memorial Production acquires Eagle ford assets

Memorial Production Partners LP has acquired certain oil and gas producing properties in the Eagle Ford from Alta Mesa Holdings LP for $173 million. The properties are located in Karnes County in the Eagle Ford oil window and consist of 15,200 gross (800 net) acres that are currently producing 1,650 boe/d (80% oil, 10% NGLs, and 10% natural gas) net to MEMP. The properties are 100% non-operated and include interests in 117 producing wells. In addition, MEMP is acquiring a 30% interest in the seller's Eagle Ford leasehold, which includes an interest in over 180 gross and 9 net PDNP and PUD locations. Murphy Oil Corp. is the primary operator of the acquired properties. MEMP will acquire all of the seller's working and net revenue interest in the producing wells subject to a net profits interest (NPI) retained by the seller that reduces annually and terminates after three years. At the end of three years, MEMP will own all of the seller's interests in the currently producing wells. The seller retained NPI results in a working and net revenue interest that escalates annually to MEMP. MEMP's effective working and net revenue interest in the 117 producing wells will increase, as the NPI reduces, to 50% of seller's interest from Jan.1 through Dec. 31; 70% of seller's interest from Jan. 1, 2015, through Dec. 31, 2015; 85% of seller's interest from Jan.1, 2016, through Dec. 31, 2016; and 100% of seller's interest from Jan. 1, 2017, and thereafter. MEMP's initial average working and net revenue interest on Jan. 1, in the 117 producing wells is 6.4% and 5.2%, respectively. Beginning Jan. 1, 2017, MEMP's average working and net revenue interest in the 117 producing wells will be 12.8% and 10.3%, respectively. MEMP's average working and net revenue interest on the PDNP and PUD locations is 4.9% and 4.0%, respectively.

Terrace Energy adds acreage in South Texas

Terrace Energy Corp. has reached an agreement to develop new acreage in Zavalla and Dimmit counties in the Buda Limestone formation in South Texas. In late Feb., the company agreed to acquire a 75% working interest and a 56.25% net revenue interest in several leases that cover 10,000 gross (6,700 net) acres by drilling a series of wells. Terrace has now agreed to develop the remaining 3,300 net acres on the same terms and conditions. The company now has the right to test and develop the Buda Limestone over 10,000 net mineral acres.

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