MEMP Buys California Assets
Offshore California production assets sold in 700 feet of water.
Memorial Production Partners LP (Nasdaq: MEMP) plans to buy oil and gas properties in offshore California from Rise Energy Partners LP for $271 million.
The properties in the transaction, known as the Beta properties, primarily consist of a 51.75% working interest in three Pacific Outer Continental Shelf blocks covering the Beta Field, and are located in federal waters approximately eleven miles offshore the Port of Long Beach, California. MEMP will operate the properties. Associated facilities include three conventional wellhead and production processing platforms, a 17.5-mile pipeline and an onshore tankage and metering facility. Two of the platforms are bridge connected and stand in approximately 260 feet of water, while the third platform stands in approximately 700 feet of water.
The Beta Field was first discovered in 1976 by Royal Dutch Shell Plc and has been in production since January 1981. As of Sept. 30, the total estimated proved reserves attributable to the Beta properties were approximately 14.3 million barrels (bbl), based on independent third-party reserve engineering, of which approximately 100% were oil and approximately 70% were classified as proved developed reserves. The present value of the reserves are $392.8 million, based on a discount rate of 10%.
The average net production associated with the Beta properties for the nine months ended Sept. 30, was 1,574 bbl per day, implying a reserve-to-production ratio of approximately 24.9 years.
Once the deal has closed, the board of directors of MEMP's general partner approved an increase in the distribution rate to $0.5075 per unit for the fourth quarter of 2012. This distribution rate will represent an annualized amount of $2.03 per unit and a 6.8% increase over the annualized minimum quarterly distribution of $1.90 per unit, as well as a 2.5% increase over the third quarter annualized distribution of $1.98 per unit.
As part of this transaction, Houston-based MEMP will acquire crude oil hedges from the closing of the acquisition through 2015. The acquired hedges will cover a significant portion of 2013 crude oil volumes as well as volumes in 2014 and 2015. In addition to the acquired hedges and consistent with its hedging policy, MEMP intends to enter into additional crude oil hedges through 2017 that will cover from 65% to 85% of its targeted crude oil production per year.
The transaction has an effective date of Sept. 1 and an expected close in December 2012.