Resolute Energy Takes A Powder In Wyoming Deal

After a tough start to the year, Resolute Energy Corp. (REN) has rebounded smartly, regaining its footing on the New York Stock Exchange and saying Sept. 16 it will sell a Powder River Basin field that should further increase liquidity.

Denver’s Resolute said it will sell its Hilight Field assets in Wyoming for $55 million. The deal, with an undisclosed, third-party buyer, is expected to close Oct. 6.

Proceeds of the sale will be used to reduce debt.

However, the company will have to request the ability to pays down part of its $160 million in borrowings from the holder of its second lien term loan, said Andrew Smith, senior E&P analyst at Global Hunter Securities.

“Based on our conversations with the company, we estimate that the Powder River Basin assets accounted for $20- to $25 million of REN's borrowing base,” Smith said.

The company is in discussions with its lenders about its fall borrowing base redetermination. Resolute expects to announce its new borrowing base and whether it will be allowed to use proceeds from the sale to repay borrowings under its revolver by early October.

“The asset sale will enhance liquidity based on REN's current borrowing base but await clarity on what the company's liquidity will be following its fall redetermination,” Smith said.

Nicholas J. Sutton, Resolute's chairman and CEO, said the transaction represents an important additional step in its plan to reduce debt and improve liquidity.

“Upon closing this transaction, we will have completed nearly $100 million of asset sales this year, thereby significantly reducing leverage and strengthening the company's balance sheet," Sutton said.

In March, Resolute agreed to sell noncore assets in the Midland Basin in West Texas for about $42 million. The assets consisted of operated and nonoperated properties primarily located in Howard County, Texas.

The Hilight Field assets consist of about 48,000 net acres, 100% HBP, operated by Resolute. The field generated production of 9.9 million cubic feet equivalent (MMcfe/d) in the second quarter of 2015, about 70% of which was gas.

The field, discovered in 1969, saw production increased by 9% in 2014. The company spent about $1- to $2 million on 2015 maintenance capital.

Smith said volumes were largely from conventional legacy operations. Another 47,800 net acres are prospective for horizontal drilling in the oil Turner and Parkman formations.

Based on production of up to $4,000 per MMcef/d, Smith said the proved developed producing (PDP) value of the asset is up to $40 million. This results in an undeveloped acreage multiple range of $315 to $730 per acre

Petrie Partners LLC acted as financial adviser to Resolute.

In early 2015, Resolute was on the ropes as commodity prices plummeted. In February, the company received notification that its listing on the New York Stock Exchange (NYSE) was in peril.

The NYSE requires that the average closing price of a listed company’s common stock be above $1 per share over a consecutive 30 trading-day period. As of Jan. 29, 2015, the 30 trading-day average closing price of the company’s common stock was $0.97 per share.

David Tameron, senior analyst at Wells Fargo Securites, said in Sept. 17 report that the deal is a positive for Samson’s finances and its credibility.

“There was… concern over whether a deal could even get done,” he said.

After a 9% increase in share price on Sept. 16, Resolute’s stock was up $0.06, or about 13% to $0.53 in morning trades Sept. 17.

Contact the author, Darren Barbee, at dbarbee@hartenergy.com.