Forestar Group To Add Credo Petroleum To Its Portfolio
To buy company with approximately 125,000 net mineral acres in ND Bakken and Three Forks, KS, NE, TX Panhandle & OK regions with 108 wells, gaining 825 BOE/d, 4.1 MMBOE proved.
Real estate management firm Forestar Group Inc., Austin, Texas, (NYSE: FOR) plans to merge with Credo Petroleum Corp., Denver, (Nasdaq: CRED) for approximately $146 million in cash.
Forestar will pay $14.50 per share for all outstanding Credo shares.
Credo focuses on oil and gas properties in the Midcontinent and Rockies regions of the U.S., with approximately 125,000 net mineral acres in the North Dakota Bakken and Three Forks, Kansas, Nebraska, Texas Panhandle and Oklahoma regions. Approximately 6,000 of the net mineral acres comprise about 50 units in the core of the Bakken and Three Forks formations. It operates approximately 108 wells, as well as owns working interests in 337 producing wells and overriding royalty interests in approximately 1,200 wells.
The company also owns the patents covering its Calliope gas recovery system, to recover stranded reserves from depleted gas reservoirs.
Total production in 2011 was 301,000 barrels of oil equivalent, or approximately 825 barrels equivalent per day. Proved reserves as of year-end 2011 were 4.1 million barrels equivalent.
Pro forma, Forestar’s reserves will increase by more than 135% to 7.1 million BOE based on year-end 2011 reserves, with oil representing 43% of total combined reserves. Annual production will increase to more than 723,000 barrels equivalent (41% oil) based on full-year 2011 results, or approximately 1,981 barrels equivalent per day.
Forestar president and chief executive Jim DeCosmo says, “Following the acquisition of Credo, we will have the scale and option to operate and capitalize on attractive oil and gas investment opportunities. This important milestone will allow us to leverage the newly acquired leasehold interests as well as our existing mineral rights to recognize and responsibly deliver the greatest value from every acre.”
DeCosmo adds there is the potential for Forestar to participate in up to 400 total wells in the primary Bakken and Three Forks zones.
Credo chairman James T. Huffman says, "We believe this transaction captures the value we have created since we began transitioning Credo from natural gas to oil about four years ago. Forestar is a larger enterprise with significant oil and gas assets, and it is well positioned to accelerate the transition that we have set in motion.”
Forestar has obtained a commitment for financing provided by Key Bank NA that, combined with available liquidity, is sufficient to fund the acquisition.
Goldman Sachs is financial advisor to Forestar and Skadden, Arps, Slate, Meagher & Flom LLP is legal counsel. Houlihan Lokey Financial Advisors Inc. and Northland Capital Financial Services LLC are financial advisors to Credo and Davis, Graham & Stubbs LLP is legal counsel.
The deal is expected to close in the second half of 2012.