Atlas Buys Mississippian Acreage
Sale of 8,550 acres in the Mississippi lime in northern Oklahoma.
Atlas Resource Partners LP (NYSE: ARP) has purchased 8,550 acres in the Mississippi lime in northern Oklahoma from Equal Energy Ltd. (NYSE: EQU) for $40 million in cash.
The assets located in Grant, Garfield and Alfalfa counties, Okla. produce about 1,400 barrels of oil equivalent (BOE) per day, most of which are natural gas and liquids. Almost all acreage is held by production.
The two companies were joint venture partners before Atlas purchased the remaining net acreage of its former partner. The sale, which closed Monday, increases Atlas’ position in the Mississippi lime to about 19,800 net acres. The deal gives Atlas about 8 million cubic feet equivalent (MMcfe) per day of net production, which generated annualized cash flows of about $3 million.
Matthew A. Jones, president and chief operating officer of Atlas, said the acquisition doubles the company’s inventory of Mississippi lime locations in the core of the play and gives the company full operating control of the upcoming development and cash flows.
“In addition, the acquired production and expected operating cost savings will immediately increase cash flow to ARP,” he said.
Atlas announced that it intends to activate a second rig in the Mississippi Lime by the end of 2012. It will also operate all infrastructure from the assets, primarily a salt water disposal system.
Don Klapko, Equal’s president and chief executive, said the sale will allow it to focus on developing other assets in central Oklahoma where liquids content is higher than in northern Oklahoma and to further strengthen its balance sheet.
“I believe the decision to sell northern Oklahoma and retain central Oklahoma sets up significant potential benefit for our shareholders. Equal's remaining central Oklahoma assets are very focused with identified drilling inventory backed by a proven track record of drilling success as well as upside from improving commodity prices," he said.
Equal stated the sale price was the equivalent of about $2,500 per acre plus about six times annualized operating cash flows from the northern Oklahoma assets based on the first six months of 2012. Equal will use the proceeds of the sale to reduce amounts outstanding on its credit facility to approximately $70 million and total debt to approximately $115 million.
Equal’s banking syndicate is reviewing the limit on the $200 million credit facility in light of this disposition. It expects the proceeds of $40 million will materially exceed the borrowing base associated with the northern Oklahoma assets.
Equal’s central Oklahoma assets currently produce 7,800 BOE per day of natural gas, rich with NGL's which comprise 48% of total volume. Adjusting for the sale, Equal's July corporate production was 9,350 BOE per day consisting of 45% natural gas, 42% NGL's and 13% oil compared to 50%, 39% and 11% before the sale.
Atlas, based in Philadelphia, Pa., will finance the purchase from its revolving credit facility. Atlas is an upstream master limited partnership with an interest in more than 8,600 producing natural gas and oil wells, representing about 700 billion cubic feet equivalent (Bcfe) of net proved reserves, primarily in the Barnett shale, The Appalachian basin and the Mississippi lime.
Equal is an exploration and production oil and gas company based in Calgary, with its United States operations office located in Oklahoma City, Okla.