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Source: Hart Energy
Titan Energy LLC said May 5 it agreed to sell to its conventional Appalachia and Marcellus assets to Diversified Gas & Oil Plc (DGO) for $84.2 million.
The sale is part of Titan’s strategy to pay down debt and focus on its Eagle Ford position, which it has said is its future. The company has also earmarked potential sales of its Rangely CO2 and Raton coalbed methane (CBM) assets.
The transaction with DGO includes the sale of about 8,400 oil and gas wells across Pennsylvania, Ohio, Tennessee, New York and West Virginia, along with associated infrastructure.
In 2016, the Appalachian assets’ average production was 30 million cubic feet equivalent per day (MMcfe/d), with 92% gas and 8% liquids.
DGO CEO Rusty Hutson Jr. called the deal “transformational,” saying it will materially increase the scale of the company’s portfolio within the Appalachian Basin.
“The proposed transaction highlights the strength of our business model in that we are able to acquire complementary assets in a proven, stable and low-risk environment at compelling valuation metrics,” he said.
The acquisition includes 264 wells that are operated by seven general partnership entities. DGO will pay $19.2 million for the partnership wells, with completion of the purchases expected by the end of August.
DGO operates about 7,500 wells across 1 million acres of conventional leaseholds in the Appalachian Basin. The company’s $84.2 million payment to Titan will be made in cash, conditional on shareholder approval.
Titan will be based in Fort Worth, Texas, following the expected closing of the deal in June.
The transaction continues Titan’s transformation into a growth-oriented oil and gas company focused on the development of the Eagle Ford Shale, CEO Daniel Herz said.
“We are selling these assets at an attractive multiple of future cash flows, de-levering our business and improving our operational efficiency,” Herz said.
Titan will retain its Utica Shale position, Indiana assets and West Virginia CBM assets in the region. In the fourth quarter, all of Titan’s Appalachia assets averaged 43 MMcfe/d, according to an April 25 company presentation.
DGO is incorporated in England and Wales as a public limited company by founders, Robert Hutson Jr. and Robert Post. The company is headquartered in Birmingham, Ala.
DGO plans to enter into a new three-year debt facility to fund the deal. The company has signed a term sheet for a new debt facility with Angelo, Gordon & Co.’s energy lending group, based in Houston.
Detring Energy Advisors marketed Titan’s Appalachian assets. Jones Day advised on the legal aspects of the transaction.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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