MEMP Buys East Texas Fields
Sale of 7,120 net acres in South Henderson Field with 139 Bcf of net proved reserves.
Memorial Production Partners LP (Nasdaq: MEMP) plans to buy oil and natural gas properties in the South Henderson Field in East Texas from Goodrich Petroleum Corp. (NYSE: GDP) for about $93 million.
The assets total 8,450 gross acres (7,120 net acres), all of which is held by production. Net proved reserves from the acreage is about 139 billion cubic feet equivalent, 22% of which are developed. The proved reserve to production ratio is about 30 years.
Net production is about 12.6 MM cubic feet equivalent per day, of which 62% if natural gas and 38% is oil and natural gas liquids. The acreage includes 42 gross wells, 40 net, with an average working interest of 96%. Memorial Production will operate 95% of the assets.
The assets include the potential for 25 gross (19 net) proved undeveloped horizontal drilling locations in the Cotton Valley formation.
Memorial Production will finance the purchase with borrowings under its existing credit facility. The effective date for this transaction is July 1, 2012. The transaction is expected to close on or about September 28, 2012.
Memorial believes the acquisition will be immediately accretive to both distributable cash flow per unit and net asset value per unit and will improve its operating margin. Management will evaluate the impact of the acquisition on current distribution levels as it integrates these acquired assets.
"This is our fourth transaction since our IPO, which demonstrates our commitment to grow MEMP through strategic acquisitions and provides MEMP with predictable, low operating cost and long-lived production," said John A. Weinzierl, chairman, president and chief executive of the general partner of MEMP.
To finance the transaction, Memorial Production has secured a commitment from its bank to expand its borrowing base to $380 million from the previous $300 million under its $1 billion revolving credit facility, which includes 11 participating banks.
After giving pro forma effect for the transaction, Memorial Production expects $295 million of debt outstanding under its credit facility, leaving approximately $85 million available. Memorial Production may seek an interim redetermination of its borrowing base prior to its next scheduled redetermination in April 2013 for any future acquisitions.
Memorial Production, with headquarters in Houston, Texas, plans to hedge a significant portion of its expected oil and natural gas production acquired in this transaction to reduce the impact to cash flows from commodity price fluctuations. Goodrich Petroleum Corp. is also based in Houston.