[Editor’s note: This story was updated at 7:56 a.m. CT Jan. 26 to include analyst commentary.]
Enerplus Corp. agreed to acquire private Williston Basin operator Bruin E&P Partners LLC in a multimillion-dollar cash transaction the company said Jan. 25 will complement its existing position in the Bakken.
Based in Houston, Bruin E&P Partners holds 151,000 net acres in the Williston Basin all located within North Dakota. The acquisition includes 30,000 net acres contiguous with Enerplus’ tier 1 acreage position in the Bakken plus significant production and development inventory concentrated in the Fort Berthold area.
Ian C. Dundas, president and CEO of Enerplus, said the enhanced operating scale and asset synergies resulting from the Bruin acquisition are expected to drive continued efficiency gains and cost reductions supporting further cash flow improvements beyond the company’s current forecast.
“This acquisition demonstrates our disciplined returns-oriented focus and commitment to value creation for our shareholders,” Dundas said in a statement on Jan. 25. “With immediately adjacent acreage offering strong operational synergies, Bruin’s assets are highly complementary to our existing tier 1 position in the Bakken and will enable us to accelerate free cash flow growth and further support our focus on providing long term sustainable shareholder returns.”
As part of the definitive agreement entered on Jan. 25, Enerplus will acquire all of the shares of Bruin E&P HoldCo LLC for total cash consideration of $465 million. The company said it plans to fund the acquisition with a new $400 million term loan and a concurrent $115 million bought deal equity financing.
Analysts with Tudor, Pickering, Holt & Co. (TPH) see the deal materially enhancing Enerplus’ 2021 free cash flow/enterprise value from 8% to 12%, which should bode well for the company shares.
“A Bakken consolidation transaction has been long in the making for [Enerplus] ERF CN and while initial considerations favored less developed acreage with more of an inventory focus, we think this deal does a nice job adapting to the current state of the market, where FCF (free cash flow) is king and consolidation is desperately wanted,” the TPH analysts wrote in a research note on Jan. 26.
Bruin’s assets include an inventory of 149 gross (111 net) drilling locations including DUCs. The company’s current production rate is approximately 24,000 boe/d (72% tight oil, 14% NGL and 14% natural gas). Proved plus probable reserves were about 84.1 MMboe, according to an independent reserves report on Bruin’s properties effective year-end 2020.
After the acquisition, Enerplus estimates it will hold more than a decade of drilling inventory capable of sustaining production at 2021 levels, with additional drilling inventory upside on Bruin’s acreage if commodity prices strengthen. The company said it will also continue to work towards its longer-term ESG goals while integrating the Bruin asstets, including a 50% reduction in greenhouse gas emissions intensity by 2030 and a 50% reduction in freshwater use per well completion by 2025.
Bruin E&P Partners formed in 2015 with backing from private equity-firm ArcLight Capital Partners LLC.
Following two smallish acquisitions in 2016, Bruin bolstered its Bakken position in 2017 with a deal for Halcón Resources’ (now known as Battalion Oil Corp.) Williston Basin assets located in the heart of the play. The $1.4 billion cash transaction was backed by Arclight.
In July 2020, Bruin and its subsidiaries filed for Chapter 11 bankruptcy and entered a financial restructuring aimed at eliminating over $840 million of the company’s funded debt. Bruin said it emerged from bankruptcy about a month later following a comprehensive balance sheet restructuring that equalized a substantial majority of Bruin’s funded debt.
Enerplus said it will not assume any debt of Bruin as part of the acquisition.
The company expects to close the Bruin acquisition in early March, subject to customary closing conditions. Stifel FirstEnergy was financial adviser to Enerplus for the Bruin acquisition. Tudor, Pickering, Holt & Co. and TD Securities were strategic advisers.
RBC Capital Markets and BMO Capital Markets are joint book-runners for the new three-year, $400 million term loan.
Vinson & Elkins LLP was U.S. legal adviser to Enerplus for the acquisition and financings. Blake, Cassels & Graydon LLP also acted as legal adviser to Enerplus on the acquisition and financings.
Enerplus is an independent North American oil and gas exploration and production company with headquarters in Calgary, Alberta. The company’s portfolio includes light oil assets in the Williston Basin across North Dakota and Montana, a position in the Marcellus natural gas shale play in northeast Pennsylvania and a group of oil assets under secondary and tertiary recovery in western Canada.
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