Eagle Energy Trust Buys Producing Oil Assets In Texas For $26 Million

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
38MM
Description

To buy producing assets on 10,000 gross aces in Hardeman County adding 300 BOE/d to production

Eagle Energy Acquisitions LP has added producing assets in Hardeman County, Texas in a $26.3 million deal.

The deal gives Eagle about 10,000 gross acres of land, a 150% increase in its total land position.

The company, a subsidiary of Eagle Energy Trust (TO: EGL-UN), has entered into a binding agreement with an undisclosed party for the acquisition, it announced Nov. 4.

Eagle expects to add 300 barrels of oil equivalent per day (BOE/d) to its existing production. The acquisition is expected to close by Nov. 25, with an effective date of Oct. 1.

Highlights:

  • Current working interest production of 300 BOE/d consisting of 97% light sweet crude (43° API) from 34 producing wells;
  • Internally estimated reserves of 1.47 million BOE (proved only) as at Oct. 1, of which 88% is proved developed producing;
  • Historical one year cash flow of $4.5 million;
  • Accretive to production, reserves and cash flow per unit;
  • Field netback of $48 per BOE at $93 WTI;
  • About 80% of the land is held by production
  • Eagle will operate 85% of the wells and hold a 90% average working interest in the assets;
  • Estimated average annual decline rate of 12%;
  • Minimal annual maintenance capital, further supporting the sustainability of the trust's cash distributions; and
  • Anticipated upside consists of recompletions, additional low risk drilling, operational enhancements and potential horizontal Atoka trend development.

The $26.3 million acquisition will be entirely funded by bank debt. Pro-forma net debt at closing is expected to be $76 million resulting in a conservative pro-forma debt to cash flow ratio of 1.5:1 based on Eagle's full year 2013 cash flow guidance adjusted for historical one year cash flow from the assets. After the closing of the acquisition, Eagle expects to have $14 million of undrawn capacity under its credit facility.

“We are pleased to add a third, high quality, low decline oil-focused asset to the Eagle portfolio,” said Richard Clark, Eagle's president and CEO, in a release. “This acquisition adds a high field netback, cash flow producing asset, which provides upside through a low risk drilling inventory.”

The assets maintain Eagle's focus on oil production located in close proximity to refineries.

Eagle Energy Trust is based in Calgary with offices in Houston.