Expands Company’s Footprint to Permian’s
Delaware Basin With Acquisition of 3,458 Core Net
Acres
Lilis Energy, Inc. (OTCQB:LLEX) today announced the closing of its
previously announced merger with San Antonio-based Brushy
Resources, Inc. (Brushy). In connection with the merger, Lilis
completed a substantial recapitalization whereby the Company
completed a private placement of preferred stock for gross proceeds
of $20 million, converted its outstanding shares of Series A
Preferred Stock, outstanding debentures and certain of its
outstanding convertible notes, as well as executed a 1 for 10
reverse stock split. These transactions create a growth-oriented
combined company with a strengthened balance sheet and, in addition
to its Denver-Julesburg (DJ) Basin holdings, a new focus on the
Permian’s Delaware Basin in West Texas and New Mexico, with 3,458
core net acres with over 500 multistack potential drilling
locations including 320 in the Wolfcamp formation. As part of the
merger, Brushy’s CEO Michael Pawelek and COO Edward Shaw are
joining Lilis Energy’s team in senior management roles, and Michael
Pawelek and Peter Benz were appointed to the Lilis Board of
Directors.
Lilis Energy’s primary acquired assets
include:
- 7,217 gross / 3,458 net acres located in the core Delaware
Basin in Winkler and Loving Counties, Texas and Lea County, New
Mexico.
- 93% of acreage is held by production through the base of all
prospective formations.
- Current daily production of approximately 470 BOE/D (47%
oil).
- 18 gross / 12.8 net producing operated wells.
- Recently drilled 2 gross / 1.6 net horizontals in the Wolfcamp
A and Brushy Canyon formations via Re-Entry through existing
vertical wellbores.
- Additional near-term upside with 12 vertical wellbores awaiting
horizontal development, initially targeting the Wolfcamp, Bone
Springs, and Avalon formations.
- Estimated Ultimate Recovery (EUR) of potential locations, based
on internal estimates, of over 130 million BOE resource
potential.
- Technical expertise in “Window Pane” completion technology,
which utilizes existing vertical wellbores and then horizontally
fracs and completes wells in selected zones, reducing drilling
costs by approximately 40%.
Lilis’s significant legacy assets
include:
- 23,031 gross / 13,913 net acres located in the Denver-Julesburg
(DJ) Basin in Weld County, Colorado, Laramie County, Wyoming, and
Kimball County, Nebraska.
- 71.5% of acreage is held by production.
- Current daily production of approximately 130 BOE/D, which
includes production from its participation in 8 recently drilled
Wattenberg Field wells.
- The DJ acreage is prospective for further development in the
Niobrara and Codell Sandstone formations.
- Over 7 gross identified South Wattenberg and 4 gross North
Wattenberg permitted drilling locations.
"This merger marks Lilis’s initial entry into the
Permian Basin and the first transaction completed as part of our
strategy of growth through the opportunistic acquisition of assets.
Brushy has built an attractive position in the Permian’s prolific
Delaware Basin, and has consistently delivered strong well results.
Our current management team, with deep experience in capital
markets, financing and operations, is highly complementary to the
seasoned technical and operating capabilities of Brushy’s
management. This is a transformative and synergistic acquisition
for Lilis. Given the severe challenges presented to exploration and
production companies everywhere by a very depressed commodity
climate during the last 18 months, this is a testament to the
resolve and determination of our Board of Directors and entire
management team. I would like to make special note of the great
work and dedication of our Exec VP and CFO, Kevin Nanke, and our
General Counsel and Secretary, Ariella Fuchs. I would like to
especially thank our new fundamental institutional investors, as
well as our existing shareholders, for the confidence they have
shown in our plan moving forward,” said Avi Mirman, President, CEO
and Director of Lilis. “We are excited to have Mike Pawelek, Ed
Shaw and Joe Pawelek join our team, and look forward to the
contributions of Mike, as well as Peter Benz, to our board. The
recent moves we've taken to strengthen the Company's balance sheet,
including the successful $20 million financing and pay-down and
conversion of debt, position us very well to further develop our
assets. Additionally, we will continue to be opportunistic to
pursue additional acquisitions in our core areas.”
Michael Pawelek, Brushy’s CEO, commented, “We are
excited to have concluded this beneficial merger which brings a
combination of attractive producing assets and acreage position.
Our team looks forward to working with the Lilis team to ramp up
the development of our Delaware and DJ leasehold. We consider these
two basins, which continue to flourish, to be the best basins in
the country, with multiple stack plays and numerous identified
drilling targets for expected growth of reserves and revenue.”
Transaction Details
In connection with the merger with Brushy, Lilis
issued approximately 5.8 million shares of its common stock, post
stock split, and assumed and restructured and/or paid Brushy’s
$13.55 million in debt (see Recapitalization Plan below). In
addition, Brushy has divested certain of its assets in South Texas
to its subordinated lender in exchange for the extinguishment of
$20.5 million in subordinated debt, payment of $500,000 in cash,
the issuance of a $1 million subordinated note, and a warrant to
purchase 200,000 shares of common stock.
Lilis also announced that it closed a previously
announced private placement of 20,000 shares of its Series B 6.0%
Convertible Preferred Stock for gross proceeds of $20 million.
Lilis used a portion of the proceeds from the offering to fund
costs associated with closing the merger and for debt repayment.
The Company intends to use the remaining proceeds for drilling and
development costs, and working capital.
Further, Lilis announces that it has completed a
reverse stock split of 1:10, effective on June 23, 2016, in
conjunction with the closing of the merger. The company has
reapplied for listing on the Nasdaq Capital Market.
Recapitalization Transactions
Lilis has completed several significant steps to
strengthen the balance sheet of the combined company and overall
financial position. These steps included the following and reflect
post-reverse split information:
- Full conversion of $6.85 million in aggregate principal amount
of its outstanding 8% Senior Secured Convertible Debentures into
1.37 million shares of common stock at a price of $5.00 per share.
Outstanding interest of $1.83 million has been forfeited by the
Debenture holders.
- Full conversion of its Series A Preferred Stock, with a
liquidation value of approximately $8.25 million, into 1.5 million
shares of common stock at a price of $5.00 per share.
Dividends of $887,000 have been forfeited by the Preferred
shareholders.
- Conversion of an aggregate principal amount of approximately
$4.0 million in its short-term convertible bridge notes into common
stock at a price of $1.10 per share. Outstanding interest of
$188,000 has been forfeited by the holders.
- Assumed $13.55 million of Brushy’s debt, paid $8 million, and
entered into an amended forbearance agreement for Brushy’s senior
secured credit facility with Independent Bank with a current
outstanding principal amount of $5.5 million with interest at 6.5%,
maturing on December 15, 2016.
- Repaid its senior lender, Heartland Bank, at a discount of
$250,000, resulting in the elimination of $2.75 million in senior
secured debt.
- Executed a reverse stock split of 1:10.
After taking into account the Recapitalization
Transactions described above, combined with the issuance of
approximately 5.8 million shares of Lilis’s common stock to Brushy,
Lilis has approximately 15.46 million shares of common stock
outstanding as of today’s date. Additionally, the newly
issued Series B Preferred shares are convertible into 18.2 million
shares of common stock. The accompanying 9.1 million warrants have
a term of two years and an exercise price of $2.50.
T.R. Winston & Company, LLC and KES 7 Capital
Inc. acted as placement agents for the private placement of Series
B Preferred Stock.
For further details on the above transactions,
please see the Company’s reports filed with the SEC.
About Lilis Energy, Inc.
Lilis Energy, Inc. is a Denver-based independent
oil and gas exploration and production company that operates in the
Denver-Julesburg (DJ) Basin and the Permian’s Delaware Basin,
considered amongst the leading resource plays in North America.
Lilis’s total net acreage in the DJ is approximately 14,000 acres,
and total net acreage in the Permian Basin is approximately 3,500.
Lilis Energy's near-term E&P focus is to grow current reserves
and production, and pursue strategic acquisitions in its core
areas. For more information, please contact MDC Group: (414)
351-9758 or visit www.lilisenergy.com.
Forward Looking Statements
This press release may include or incorporate by
reference "forward-looking statements" as defined by the SEC,
including but not limited to statements regarding Lilis Energy's
expectations, beliefs, intentions or strategies regarding the
future. These statements are qualified by important factors that
could cause Lilis Energy's actual results to differ materially from
those reflected by the forward-looking statements. Such factors
include but are not limited to Lilis Energy's ability to finance
its continued exploration, drilling operations and working capital
needs, and the general risks associated with oil and gas
exploration and development, including those risks and factors
described from time to time in Lilis Energy's reports filed with
the SEC.
Contact:MDC GROUPInvestor
RelationsDavid Castaneda (414) 351-9758
Media RelationsSusan Roush(805) 624-7624
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