2009-10-26-2009-09-30-2009-11-25

Purchased producing assets in OH & PA, gaining 121.9 Bcfe proved, 14.4 MMcfe/d.

Privately held EnerVest Ltd., Houston, and its MLP subsidiary EV Energy Partners LP, Houston, (Nasdaq: EVEP) have closed their acquisition of Ohio and northwestern Pennsylvania producing assets in the Appalachian Basin from Exco Resources Inc., Dallas, (NYSE: XCO) for $131.2 million. The companies held back approximately $13.1 million for up to 90 days pending consents from third parties. Excluding those properties held back, the properties sold include estimated proved reserves of 1.9 million barrels of oil and 73.1 billion cubic feet of gas, or 84.5 billion cubic feet of gas equivalent based on SEC pricing as of Sept. 30. Current net production is approximately 15 million cubic feet of gas equivalent per day for the properties sold at the closing. EV Energy acquired a 17.2% undivided interest in these assets for $25 million. At the time of announcement, the MLP's share of the acquisition was to involve 11.4 billion cubic feet of proved reserves as of Sept. 1. (90% gas; 96% proved developed producing) with an estimated 4.2 billion equivalent of Knox potential. Net production to EV Energy was to be 2.5 million cubic feet equivalent per day. The reserves-to-production ratio is 12.7 years for proved reserves and 17 years for proved plus Knox potential reserves. The total acquisition before potential third-party consents is comprised of approximately 3,000 wells producing primarily from the Clinton, Knox, Medina, Bradford and Oriskany formations in Ohio and northwestern Pennsylvania. The acquired properties are not prospective for Marcellus shale. Significant upside potential exists for drilling in the Knox group formation, where EnerVest has more than six years of experience. The deal involves more than 335,000 gross acres. EnerVest has identified more than 100 potential Knox drilling opportunities that it plans to pursue over the next five years. EV Energy chairman and chief executive John B. Walker says, "This acquisition provides EVEP with a long-life, predictable base production stream and the opportunity for future production growth in a play where EnerVest has had significant drilling success over the past six years." EV Energy intends to hedge a substantial portion of the production. Douglas H. Miller, Exco chief executive, says, "This sale is part of our ongoing effort to divest certain nonstrategic assets. We have now reached agreement on nearly $600 million of such asset sales and will continue our efforts." Exco used the proceeds to pay debt. The effective date is Sept. 1. RBC Richardson Barr was advisor to Exco. EnerVest has in excess of $500 million remaining in its current fund for acquisitions, and it is currently raising funds for its Fund XXII. Jack Aydin, analyst at KeyBanc Capital Markets Inc., at the announcement estimated Exco would receive approximately $1.19 per proved Mcfe and $10,069 per flowing Mcfe per day. "We believe Exco has come through with its deleveraging endeavors and now sits with more than $600 million of unused liquidity. We would not be surprised to see additional smaller assets sales; however, the bulk of these noncore assets have been sold." Following the sale, Exco has total debt down to about $1.55 billion with $111 million of cash on hand.