Enduro Royalty Trust Announces Sponsor’s Entry Into Agreements to Sell Properties in the Permian Basin
June 07 2017 - 9:00AM
Business Wire
Enduro Royalty Trust (NYSE: NDRO) (the “Trust”) today announced
that Enduro Resource Partners LLC (“Enduro”), the sponsor of the
Trust, has advised The Bank of New York Mellon Trust Company, N.A.,
as Trustee, that Enduro has entered into eight separate purchase
and sale agreements to divest certain acreage and associated
production in the Permian Basin (the “Divestiture Properties”) that
constitutes part of the properties underlying the Trust and is
therefore burdened by the Trust’s 80% net profits interest. Because
the Divestiture Properties are burdened by the Trust’s 80% net
profits interest, Enduro will seek, through a vote of the Trust
unitholders, a release of the Trust’s net profits interest in the
Divestiture Properties in exchange for the Trust unitholders
receiving 80% of the net proceeds of the sale of the Divestiture
Properties.
The total purchase price, subject to ordinary closing
adjustments, is $50.4 million, and includes Enduro’s working
interest and assumes the release of the net profits interest owned
by the Trust. Enduro currently anticipates that this could result
in net proceeds to the Trust unitholders of approximately $40
million, which is net of anticipated expenses to be incurred in
connection with the transactions. These anticipated net proceeds
are prior to an escrowed amount not to exceed $750,000 to cover
possible indemnification obligations under the purchase and sale
agreements (the escrowed amount will be released no later than 25
months after the closing of the transactions).
The Divestiture Properties have the following
characteristics:
- The properties are non-operated.
- The transactions are primarily
comprised of 5,078 net undeveloped acres across 8 counties in Texas
and New Mexico and include minimal production from which net
profits allocable to the Trust, and distributions to Trust
unitholders, have been generated.
- Of the 5,078 net undeveloped acres,
3,824 net acres are prospective for development in the typical
Permian Basin horizontal targets. Of the remaining net acres, 985
net acres have no rights to the Delaware, Bone Spring, and Wolfcamp
zones, and 269 net acres are located where drilling is prohibited
due to potash mining operations.
- Sales volumes related to the
Divestiture Properties totaled 14,303 Bbls of oil (39 Bbls/D) and
137,932 Mcf of natural gas (377 Mcf/D) for periods related to
distributions paid in the year ended December 31, 2016. This
amounts to 37,292 BOE (102 BOE/D) compared to 1,545,954 BOE (4,224
BOE/D) for all the properties underlying the Trust; therefore, the
sales volumes represented approximately 2% of the sales volumes of
the properties underlying the Trust for such period.
- Upside potential related to the
Divestiture Properties is capital-intensive and uncertain and is
not reflected in the Trust reserve report.
- Total reserves for the Divestiture
Properties from the December 31, 2016 SEC reserve report were 254
MBOE of the 10,151 MBOE reserves of the properties underlying the
Trust, or 2.5%.
- Net profits allocable to the Trust from
the Divestiture Properties were only approximately $0.003 per unit
for distributions paid during 2016, representing approximately 1%
of the distributions for the year.
The sales transactions contemplate the release of the net
profits interest on the Divestiture Properties, which requires a
special meeting of Trust unitholders. At such meeting, Trust
unitholders of record holding at least 75% of the 33,000,000
outstanding Trust units must vote in favor of the transaction to
release the net profits interest. Enduro actively marketed the
Divestiture Properties and none of the purchasers are affiliated
with Enduro or its private equity sponsor.
A preliminary proxy statement will be filed with the SEC in the
near future regarding the proposed transactions and special meeting
of unitholders. Enduro currently owns 26% of the outstanding Trust
units.
About Enduro Royalty Trust
Enduro Royalty Trust is a Delaware statutory trust formed by
Enduro Resource Partners to own a net profits interest representing
the right to receive 80% of the net profits from the sale of oil
and natural gas production from certain of Enduro Resource
Partners’ properties in the states of Texas, Louisiana and New
Mexico. As described in the Trust’s filings with the Securities and
Exchange Commission, the amount of the periodic distributions is
expected to fluctuate, depending on the proceeds received by the
Trust as a result of actual production volumes, oil and gas prices,
the amount and timing of capital expenditures, and the Trust’s
administrative expenses, among other factors. Future distributions
are expected to be made on a monthly basis. For additional
information on the Trust, please visit
www.enduroroyaltytrust.com.
Forward-Looking Statements and Cautionary Statements
This press release contains statements that are “forward-looking
statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements contained in this
press release, other than statements of historical facts, are
“forward-looking statements” for purposes of these provisions.
These forward-looking statements include the amount of any
anticipated distribution to unitholders as a result of the proposed
disposition of certain properties and expected expenses, including
capital expenditures. The anticipated distribution is based, in
large part, on the amount of cash received or expected to be
received by the Trust from Enduro Resource Partners as a result of
the sale of the underlying properties. Other important factors that
could cause actual results to differ materially include expenses of
the Trust and reserves for anticipated future expenses. Statements
made in this press release are qualified by the cautionary
statements made in this press release. Neither Enduro Resource
Partners nor the Trustee intends, and neither assumes any
obligation, to update any of the statements included in this press
release. An investment in units issued by Enduro Royalty Trust is
subject to the risks described in the Trust’s filings with the SEC,
including the risks described in the Trust’s Annual Report on Form
10-K for the year ended December 31, 2016, filed with the SEC on
March 15, 2017. The Trust’s quarterly and other filed reports are
or will be available over the Internet at the SEC’s website at
http://www.sec.gov.
Additional Information and Where to Find It
This communication does not constitute a solicitation of any
vote or approval in respect of the proposed transactions as they
affect the Trust and the release of its net profits interest. In
connection with the proposed transactions, a meeting of the Trust’s
unitholders will be announced to seek unitholder approval. The
Trust intends to file with the SEC a proxy statement in connection
with the proposed meeting of unitholders. UNITHOLDERS ARE ADVISED
TO READ THE DEFINITIVE PROXY STATEMENT WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE RELEASE OF
THE TRUST’S NET PROFIT INTEREST WITH RESPECT TO THE UNDERLYING
PROPERTIES SUBJECT TO THE PROPOSED TRANSACTIONS. The proxy
statement and other relevant materials (when they become
available), and any other documents filed by the Trust with the
SEC, may be obtained at no cost at the SEC’s website at
http://www.sec.gov, at the Trust’s website at
http://www.enduroroyaltytrust.com, or by sending written request to
the Trust at The Bank of New York Mellon Trust Company, N.A.,
Trustee, 919 Congress Avenue, Suite 500, Austin, Texas 78701.
Participants in the Solicitation
The Trust may be deemed to be a participant in soliciting
proxies from the Trust’s unitholders in connection with the
proposed transaction and the release of the Trust’s net profits
interest with respect to the underlying properties. Information
regarding the Trust that may, under the rules of the SEC, be
considered to be a participant in any solicitation in connection
with the proposed transaction will be contained in the proxy
statement. Additional information can be obtained in the Trust’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2016.
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Enduro Royalty TrustThe Bank of New York Mellon Trust Company,
N.A., as TrusteeSarah Newell, 1-512-236-6555
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