Constellation Energy Partners LLC (NYSE MKT: CEP) today
announced that the company has executed and closed a definitive
agreement pursuant to which CEP has entered into a new business
relationship with Sanchez Oil & Gas Corporation (“Sanchez Oil
& Gas”) and its affiliate, Sanchez Energy Partners I, LP ("SEP
I" and together with Sanchez Oil & Gas, "SOG").
Under the agreement, CEP has acquired oil, natural gas and
natural gas liquids assets in Texas and Louisiana from SEP I for a
purchase price of $30.4 million.
In conjunction with the acquisition, SEP I received $20.1
million in cash, 1,130,512 Class A units, which represents 70.0% of
the total Class A units outstanding after the transaction, and
4,724,407 Class B units, which represents 16.6% of the total Class
B units outstanding after the transaction.
CEP and SOG believe that the transaction, pursuant to which SEP
I now owns a 17.7% limited liability company interest in CEP, is an
important first step toward a wide variety of business development
opportunities that may be pursued by the parties.
“This transaction, which falls on the heels of our efforts to
improve the balance sheet and refinance the company earlier this
year, is transformative for CEP,” commented Stephen R. Brunner,
President and Chief Executive Officer of CEP. “In addition to the
immediate benefits we anticipate from the acquired assets, we see
our new relationship with SOG as a means to achieving enhanced deal
flow, which may occur through future asset contributions or joint
acquisitions. At the same time, we see an opportunity to leverage
the skills of SOG, a proven operator with an outstanding technical
team and experience that spans across multiple basins in the
U.S.”
“CEP’s management team has done an excellent job of managing
through a low gas price environment and successfully restructuring
the company’s balance sheet to position it for future growth,"
added Antonio R. Sanchez, III, President of Sanchez Oil & Gas.
“We look forward to working closely with them in continuing to
develop and maximize the value of the acquired assets, CEP’s other
properties and any future opportunities that may arise.”
Acquired Assets
The acquired assets include 67 wells, 75% operated by SOG, with
current net production of approximately 1,167 Boe per day, of which
approximately 25% is oil and natural gas liquids production. Based
on internal reserve estimates and forward prices as of June 30,
2013, the assets provide total reserves of 1,658 MBoe, of which
approximately 87% are proved developed. The acquisition has an
effective date of August 1, 2013.
Credit Facility Update
The cash portion of the transaction was financed with cash on
hand and a borrowing of $16.7 million under CEP’s reserve-based
credit facility. As of the closing, borrowings under CEP’s
reserve-based credit facility total $50.7 million, leaving the
company with $4.3 million in borrowing capacity under the
reserve-based credit facility, which currently has a borrowing base
of $55.0 million.
CEP anticipates that the borrowing base impact of the acquired
assets, in addition to CEP's recent oil development activities,
will be considered by lenders in the normal course, with the next
semi-annual redetermination of the company’s borrowing base
expected in the fourth quarter of 2013.
Board of Managers Update
CEP also announced that its Class A unitholders have replaced
their previous Class A managers and have elected Antonio R.
Sanchez, III and Gerald F. Willinger to serve as the Class A
managers effective from August 9, 2013 until the next election of
Class B Managers. Mr. Sanchez founded SEP I and is currently the
President of Sanchez Oil & Gas and a Managing Director of SEP
I. Mr. Willinger is a Managing Partner of Sanchez Capital Advisors,
LLC and Manager and Co-founder of Sanchez Resources, LLC.
Additional Information
Additional details concerning the transaction and Class A
managers can be found in the company’s filings with the Securities
and Exchange Commission and on the company’s Web site
(http://www.constellationenergypartners.com).
Stifel provided a fairness opinion to CEP’s board of managers in
connection with the transaction.
RBC Capital Markets, LLC acted as exclusive financial advisor to
SOG in this transaction.
About Constellation Energy Partners LLC
Constellation Energy Partners LLC (“CEP”) is a limited liability
company focused on the acquisition, development and production of
oil and natural gas properties, as well as related midstream
assets. The company’s proved reserves are located in the Cherokee
Basin in Oklahoma and Kansas, the Woodford Shale in the Arkoma
Basin in Oklahoma, the Central Kansas Uplift in Kansas, and in
Texas and Louisiana.
About Sanchez Oil & Gas Corporation
Sanchez Oil & Gas Corporation (“Sanchez Oil & Gas”) is a
private company engaged in the management of oil and natural gas
properties on behalf of its affiliates. Headquartered in Houston,
Texas, Sanchez Oil & Gas's major areas of activity have
historically been in the onshore Gulf Coast, Mid-Continent and
Rocky Mountain regions. Since 1972, Sanchez Oil & Gas and
various affiliates have participated in and managed the drilling of
over 900 wells, investing a substantial amount of capital in well
costs, seismic and acreage.
Additional details can be found on the company’s Web site
(http://www.sanchezog.com).
About Sanchez Energy Partners I, LP
Sanchez Energy Partners I, LP (“SEP I”) is a limited term
private partnership operated and managed by Sanchez Oil & Gas
Corporation. Formed in 2007, SEP I manages oil and natural gas
private equity investments for its limited partners including
numerous third party institutional and individual investors. SEP
I’s focus is the exploration for, and development of, U.S. onshore
oil and natural gas reserves. SEP I is currently focused on U.S.
Gulf Coast conventional natural gas assets in addition to
undeveloped acreage positions in Kansas, Illinois and West
Texas.
Forward-Looking Statements
This news release contains statements that are considered
forward-looking statements within the meaning of the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as
amended. These forward-looking statements are largely based on the
company’s expectations, which reflect estimates and assumptions
made by the company’s management. These estimates and assumptions
reflect the company’s best judgment based on currently known market
conditions and other factors. Although the company believes such
estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are
beyond the company’s control. In addition, management's assumptions
about future events may prove to be inaccurate. Management cautions
all readers that the forward-looking statements contained in this
news release are not guarantees of future performance, and the
reader cannot be assured that such statements will be realized or
the forward-looking events and circumstances will occur. Actual
results may differ materially from those anticipated or implied in
the forward-looking statements due to factors listed in the "Risk
Factors" section of each company’s SEC filings and elsewhere in
those filings. All forward-looking statements speak only as of the
date of this news release. The company does not intend to publicly
update or revise any forward-looking statements as a result of new
information, future events or otherwise. These cautionary
statements qualify all forward-looking statements attributable to
the companies or persons acting on the company’s behalf.
Constellation Energy Partners LLCCharles C. Ward,
877-847-0009
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