HOUSTON--(BUSINESS WIRE)--LRR Energy, L.P. (NYSE: LRE) (“LRR Energy” or “LRE”) announced today that it signed a definitive agreement to acquire oil and natural gas properties in the Mid-Continent region in Oklahoma from its sponsor, Lime Rock Resources, for a purchase price of $21.0 million, subject to customary purchase price adjustments. As part of the transaction, LRE will acquire commodity hedge contracts that LRE estimates to be currently valued at approximately $1.7 million. The purchase price will be adjusted based on the value of the hedge contracts at the closing of the transaction. The effective date of the transaction is October 1, 2012, and closing of the transaction is expected to occur on or about January 3, 2013, and is subject to customary approvals and closing conditions. LRE plans to finance the transaction with borrowings under its existing revolving credit facility. Terms of the transaction were approved on November 29, 2012, by the Board of Directors of the general partner of LRE and by the Board's conflicts committee, which is comprised entirely of independent directors.
“This transaction fits our operational strategy of acquiring long life properties and is a bolt-on to one of our core areas where we have extensive operating expertise and scale.”
Eric Mullins, Chairman and Co-Chief Executive Officer, commented, "We are excited to announce our second acquisition from our sponsor, Lime Rock Resources. The transaction includes liquids-weighted, mature properties with a large inventory of low-risk development opportunities. The transaction is expected to be immediately accretive to distributable cash flow on a per unit basis.”
Charlie Adcock, Co-Chief Executive Officer, noted, “This transaction fits our operational strategy of acquiring long life properties and is a bolt-on to one of our core areas where we have extensive operating expertise and scale.”
The properties are located in Dewey and Custer Counties, Oklahoma.
• Estimated net proved reserves of approximately 1,987 MBoe (based on Netherland, Sewell & Associates reserve report with an effective date of October 1, 2012)
• Approximately 55% of proved reserves are oil and natural gas liquids
• 53% of proved reserves are proved developed producing
• Current net production of approximately 350 Boe per day
• Proved reserves to production ratio of 15.6 years
• 124 producing wells, 32 of which are operated
• Estimated maintenance capital expenditures of $1.0 million per year (to hold production of 270 Boe per day flat through 2015)
• Based on acquired hedges, approximately 73% of expected PDP production is hedged through 2015
The acquisition is expected to be immediately accretive to distributable cash flow per unit. As of November 29, 2012, and after taking into account the estimated total adjusted purchase price of the transaction, LRE will have approximately $45 million borrowing capacity under its revolving credit facility ($250 million borrowing base less $205 million of outstanding borrowings) and approximately $8 million of cash on hand. The borrowing base capacity of $45 million excludes any potential increase in the borrowing base related to the newly acquired properties. LRE management believes that LRE’s cash on hand, expected cash flow from operations and available borrowing capacity under its revolving credit facility is more than sufficient to fund expected 2012 and 2013 capital expenditures, working capital and cash distributions.
As part of this transaction, LRE will acquire the following crude oil and natural gas hedges:
|Natural gas positions|
|Price swaps (MMBTUs)||NYMEX-HH||248,950||200,916||173,676|
|Weighted average price||$||5.23||$||5.58||$||5.96|
|Price swaps (BBLs)||NYMEX-WTI||39,794||28,176||22,128|
|Weighted average price||$||101.30||$||100.01||$||98.90|
The conflicts committee engaged Tudor, Pickering, Holt & Co. Securities, Inc. to act as its financial advisor and Bracewell & Giuliani LLP to act as its legal advisor.
About LRR Energy, L.P.
LRR Energy is a Delaware limited partnership formed in April 2011 by affiliates of Lime Rock Resources to operate, acquire, exploit and develop producing oil and natural gas properties in North America. LRR Energy's properties are located in the Permian Basin region in West Texas and southeast New Mexico, the Mid-Continent region in Oklahoma and East Texas and the Gulf Coast region in Texas.
This press release includes "forward-looking statements" — that is, statements related to future events. Forward-looking statements are based on the current expectations of LRR Energy and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "may," "predict," "pursue," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "target," "continue," "potential," "should," "could" and other similar words. Actual results and future events could differ materially from those anticipated or implied in such statements. Forward-looking statements involve certain risks and uncertainties, and ultimately may not prove to be accurate. These risks and uncertainties include, among other things, a decline in oil, natural gas or NGL prices, the risk and uncertainties involved in producing oil and natural gas, competition in the oil and natural gas industry, governmental regulations and other factors. Actual results could differ materially from those anticipated or implied in the forward-looking statements due to the factors described under the captions "Risk Factors" in LRR Energy's Annual Report on Form 10-K for the year ended December 31, 2011 and LRR Energy's subsequent filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements speak only as of the date of this release. LRR Energy does not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise. All forward-looking statements are qualified in their entirety by this cautionary statement.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only "reserves" as defined by SEC rules. Estimates of reserves in this press release are based on economic assumptions with regard to commodity prices that differ from the prices required by the SEC (historical 12 month average) to be used in calculating reserves estimates prepared in accordance with SEC definitions and guidelines. In addition, the estimates of reserves in this press release were prepared by Netherland, Sewell & Associates, Inc. and are based on various assumptions, including assumptions related to oil and natural gas prices as discussed above, drilling and operating expenses, capital expenditures, taxes and availability of funds.