Constellation Energy Partners to Acquire Coalbed Methane Properties for $115 Million; Acquisition Will Expand Operations into Ka
March 08 2007 - 5:29PM
PR Newswire (US)
BALTIMORE, March 8 /PRNewswire-FirstCall/ -- Constellation Energy
Partners LLC (NYSE:CEP) today announced that it has signed a
definitive purchase agreement to acquire certain coalbed methane
properties from EnergyQuest Resources LP, a Quantum Energy Partners
portfolio company, for an aggregate purchase price of $115 million,
subject to purchase price adjustments. The properties, a portion of
which are operated by Bullseye Operating LLC, are located in the
Cherokee Basin in Kansas and Oklahoma. The acquisition is subject
to customary closing conditions and is expected to close in
mid-April. Felix Dawson, chief executive officer of Constellation
Energy Partners, said, "The Cherokee Basin properties are an
excellent fit with our existing asset portfolio and allow us to
extend our focus and geographic footprint in coalbed methane. These
assets are also consistent with our target acquisition profile of
long-lived, stable producing properties with low-risk drilling
opportunities. We expect the acquisition to be immediately
accretive to distributable cash, demonstrating our ability to
execute against our commitment to increase distributions over time.
The support of our sponsor, Constellation Energy, was instrumental
in making this acquisition. We believe that our relationship with
Constellation Energy will continue to help us achieve our growth
objectives." Operational highlights: - Estimated proved reserves 49
Bcf - Reserve life index of 17 years - Current net production of
approximately 7,900 Mcfe per day - Over 550 producing wells with an
average 75 percent operated production - Over 800 low-risk,
low-cost drilling and recompletion opportunities on approximately
96,000 gross acres - Over 500 miles of pipeline gathering systems
Financial highlights: - Expected to be immediately accretive to
distributable cash flow per unit. Management will evaluate the
impact of the acquisition on current distribution levels as it
integrates the assets. All changes in distributions are subject to
approval by the company's Board of Managers. - Incremental Adjusted
EBITDA projections - Year 1 estimated - $14 to $16 million - Year 2
estimated - $20 to $25 million - Estimated annual maintenance
capital of $1.5 to $3.0 million - Cash flow stability expected to
be achieved by significant hedging through 2010 Constellation
Energy Partners has entered into a unit purchase agreement to sell
in a private placement 2,207,684 common units at a price of $26.12
per unit and 90,376 newly-created Class E units at a price of
$25.84 per unit to third party investors, for aggregate cash
proceeds of $60 million. The Class E units will convert into common
units upon obtaining common unit holder approval. The company has
undertaken to obtain this approval within 90 days after closing.
Constellation Energy Partners Holdings LLC, the owner of a majority
of the outstanding common units, will agree to vote its common
units in favor of the conversion. The company also has agreed to
file a registration statement with the SEC registering for resale
the common units and common units issuable upon conversion of the
Class E units within 75 days after the closing. The proceeds from
this equity private placement, together with funds available under
the company's revolving credit facility, will fully fund the
purchase price of the acquisition from EnergyQuest Resources LP.
The company anticipates that the private placement will close
simultaneously with the acquisition of the assets. The private
placement investor group was led by GPS Partners LLC and included
Lehman Brothers MLP Partners LP and ZLP Fund LP. Simmons &
Company International and Griffis & Associates LLC acted as
financial advisors to EnergyQuest Resources LP in the acquisition.
Constellation Energy Partners was formed - and is currently 54
percent owned - by Constellation Energy (NYSE:CEG), an energy
company with a $13 billion market capitalization. Constellation
Energy Partners LLC, (http://www.constellationenergypartners.com/),
is a limited liability company focused on the acquisition,
development and production of oil and natural gas properties, as
well as related midstream assets. Non-GAAP Measures Adjusted EBITDA
is a non-GAAP financial measure that is defined as net income
(loss) adjusted by interest (income) expense; depreciation,
depletion and amortization; write-off of deferred financing fees;
impairment of long- lived assets; (gain) loss on sale of assets;
(gain) loss from equity investment; accretion of asset retirement
obligation; realized (gain) loss on cancelled natural gas
derivatives, and; unrealized (gain) loss on natural gas
derivatives. Adjusted EBITDA is used by management to indicate
(prior to the establishment of any cash reserves by our board of
managers) the cash distributions we expect to pay our unitholders.
Specifically, this financial measure indicates to investors whether
or not we are generating cash flow at a level that can sustain or
support an increase in our quarterly distribution rates. Adjusted
EBITDA is also used as a quantitative standard by our management
and by external users of our financial statements such as
investors, research analysts and others to assess the financial
performance of our assets without regard to financing methods,
capital structure or historical cost basis; the ability of our
assets to generate cash sufficient to pay interest costs and
support our indebtedness; and our operating performance and return
on capital as compared to those of other companies in our industry,
without regard to financing or capital structure. Adjusted EBITDA
is not presented as a substitute for net income, operating income,
cash flows from operating activities or any other measure of
financial performance or liquidity presented in accordance with
GAAP. We are unable to reconcile our incremental Adjusted EBITDA
projections to GAAP net income or operating income because we do
not predict the future impact of adjustments to net income (loss),
such as (gains) losses on gas derivatives or equity investments or
asset impairments, due to the difficulty of doing so.
Forward-Looking Statements We make statements in this news release
that are considered forward- looking statements within the meaning
of the Securities Exchange Act of 1934. These forward-looking
statements are largely based on our expectations, which reflect
estimates and assumptions made by our management. These estimates
and assumptions reflect our best judgment based on currently known
market conditions and other factors. Although we believe such
estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are
beyond our 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 we cannot
assure you 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 in our Securities and Exchange Commission filings
and elsewhere in those filings. All forward-looking statements
speak only as of the date of this news release. We do not intend to
publicly update or revise any forward-looking statements as a
result of new information, future events or otherwise. DATASOURCE:
Constellation Energy Partners LLC CONTACT: Media - Lawrence
McDonnell, +1-410-470-7433, or Investors - Tonya Cultice,
+1-410-783-3383 Web site:
http://www.constellationenergypartners.com/ Company News On-Call:
http://www.prnewswire.com/comp/084087.html
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