Affiliates of Apollo Global Management LLC, New York, (NYSE: APO), along with New York-based private-equity firm Riverstone Holdings LLC, New York-based Access Industries Inc. and other investors plan to acquire all of the oil and gas E&P assets of El Paso Corp., Houston, (NYSE: EP) for approximately $7.15 billion.
The transaction is to be funded with $4.5 billion in reserve-based debt financing—63% of the purchase price—and is subject to closing of the merger between Kinder Morgan Inc. and El Paso.
El Paso’s upstream assets are centralized in four divisions. The southern division includes U.S. properties in the Eagle Ford, Wolfcamp and portions of its Gulf of Mexico and South Texas assets. The central division includes its active Haynesville business area, South Louisiana Wilcox program, and its assets in East Texas and northern Louisiana plus shallow unconventional programs.
The western division includes an active drilling program in the Altamont region in Utah, and business areas focused on asset optimization in the Raton Basin and the Rockies. The company’s international division includes operations in the Camamu, Espirito Santo, and Potiguar basins offshore Brazil and two blocks primarily onshore in Egypt’s Western Desert.
Average production in 2010 was 782 million cu. ft. of gas equivalent per day. Proved reserves as of year-end 2010 were 3.4 trillion cu. ft. equivalent. This includes 48.8% interest in Four Star Oil & Gas Co.
El Paso’s net operating loss carry forwards will largely offset taxes associated with the sale of the E&P assets, and thus almost the entirety of the proceeds from the sale will be used to substantially reduce the debt borrowed by Kinder Morgan to fund the cash portion of its purchase of El Paso.
The sale of EP Energy is expected to close about the same time as the merger of Kinder Morgan, during the second quarter.
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