Black Stone Minerals Co. LP, Houston, and certain co-investors including the LeFrak Organization have made an offer to acquire the mineral business of MLP Eagle Rock Energy Partners LP for $157.5 million.
Black Stone manages the largest asset in Eagle Rock’s mineral business and holds the executive rights.
In September, Eagle Rock majority shareholder Natural Gas Partners IX LP proposed that Eagle Rock offer for sale its mineral business, one of three divisions including E&P and midstream holdings, in a go-shop process in which NGP would back-stop the acquisition price at $135 million. In April, Eagle Rock virtually eliminated its distributions following a downsizing in its borrowing base in an effort to pay down debt, and is considering other proposals from NGP to improve its liquidity.
Eagle Rock’s mineral business consists of fee mineral, royalty and overriding royalty interests in more than 2,800 wells in the Permian Basin, Gulf Coast, Midcontinent and L.A. Basin. Proved reserves as of year-end 2008 were 3.6 million BOE (77% oil) involving 430,000 net acres.
Black Stone’s offer also proposes to provide an equity-investment commitment to support a proposed public offering by Eagle Rock of common units at $3.40 per unit, and to grant Eagle Rock options to reacquire from Black Stone up to 2.8 million common units issued to Black Stone pursuant to its equity-investment commitment, and up to 15% of the minerals business sold to Black Stone. No fees are associated with Black Stone’s proposal.
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