ARP Acquires 466 Bcf Of Proved Natural Gas Reserves

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
733MM
Description

Bought 466 Bcf of natural gas proved reserves in the Raton and Black Warrior basins.

Atlas Resource Partners LP announced June 10 that it has entered into a definitive agreement to acquire about 466 billion cubic feet (Bcf) of natural gas proved reserves in the Raton (New Mexico) and Black Warrior (Alabama) Basins from EP Energy E&P Co. LP, a wholly owned subsidiary of EP Energy LLC, for $733 million. The transaction, which is expected to close in the third quarter and is subject to purchase-price adjustments, will have an effective date of May 1, 2013.

As a result of the acquisition, ARP is providing full-year 2014 distribution guidance of at least $2.60 per unit. The transaction is expected to be immediately accretive to distributable cash flow. This represents a 27% increase compared with the current annualized distribution of $2.04 ($0.51 per unit paid for first quarter 2013).

Edward E. Cohen, chief executive of ARP, said, “This acquisition is expected to be directly and positively transformative to ARP and its existing operations. An important goal at ARP is to build stakeholder value through targeted acquisitions. We are determined to continue to execute on this strategy.”

Upon closing, the new EP Energy assets are expected to immediately provide ARP with accretive cash flow from a substantial amount of mature, low-declining natural gas production in various regions, primarily in various producing areas including the Raton Basin and the Black Warrior Basin.

The acquired properties represent about 466 Bcf of natural gas proved reserves, of which 93% are proved developed. The assets currently produce approximately 119 MMcfd of natural gas, which nearly doubles ARP’s existing net production for May 2013. In addition, by agreement with ARP, ARP’s parent, Atlas Energy LP, will acquire as part of the same transaction about 45 Bcf of natural gas proved reserves in the Arkoma Basin (southeastern Oklahoma) from EP Energy for approximately $67 million.

Matthew A. Jones, president and chief operating officer of ARP, added, “These newly acquired assets will be a strong complement to our existing high-quality oil and gas portfolio. Through this acquisition, these new positions will provide substantial low decline proved developed reserves to our operations, allowing us greater ability to grow our business through organic development.”

Breaking Down The Acquired Assets:

466 Bcf of proved reserves; 100% natural gas, 93% proved developed.

  • Raton Basin: 320 Bcf of proved reserves.
  • Black Warrior Basin: 141 Bcf of proved reserves.
  • County Line region (Wyoming): 6 Bcf of proved reserves.

Current net production of approximately 119 MMcfd for May 2013.

Current annual decline rate of 8-10% on existing production; pro forma company production is expected to reach approximately 11%.

Current production costs: lease operating costs of approximately $0.90/Mcf; production and ad valorem taxes of approximately 9%; transportation and gathering of approximately $0.35/Mcf.

Realized natural gas prices represent NYMEX less a differential of approximately $0.05-$0.15/Mcf.