Eagle Energy Trust's (Toronto: EGL.UN) U.S. operating subsidiary has closed the sale of its entire working interest in its oil and natural gas properties in the Permian Basin, located near Midland, Texas, to an undisclosed buyer for cash consideration of US$140 million before closing adjustments.
The disposition means Eagle's go-forward corporate product mix moves from about 82% oil to 96% oil, which is expected to increase its average netback per barrel of oil equivalent. The US$140 million sale proceeds (before transaction costs and closing adjustments) exceed the proved plus probable reserve value (discounted at 10%) of the Permian Basin properties in Eagle's independent December 31, 2013 reserves report by $42.7 million. Based on the Trust units currently outstanding, this excess equates approximately to C$1.34 per unit above Eagle's previously stated reserve value.
Eagle's working interest production as of July 1, 2014, excluding the Permian Basin assets, was approximately 1,940 barrels of oil equivalent per day. The trust intends to use the net proceeds from the disposition to fully retire its outstanding advances under its existing credit facility and expects to have approximately US$55 million of cash remaining (before closing adjustments). In addition, Eagle's borrowing base after giving effect to the disposition has been redetermined to US$55 million, which also constitutes its semi-annual September 1, 2014 borrowing base. Eagle intends to re-deploy the capital to acquire other assets expeditiously with a view to significantly improve its sustainability and lower its payout ratio.
Eagle is based in Calgary.
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