Eagle Energy Trust (TO: EGL-UN) announced Aug. 13 it is exiting the Permian Basin in a move to reset the Trust's business model.
Calgary-based Eagle's U.S. operating subsidiary entered into an agreement to sell its entire working interest in its oil and natural gas properties in the Permian Basin, located near Midland, Texas, to an undisclosed buyer for $140 million in cash. The buyer was not disclosed.
Since acquiring the property in mid-2012, the assets have generated cashflow to Eagle of $28 million.
The capital required to execute in the Permian has risen substantially, making it unsuitable for development acceptable leverage parameters for the Trust, said Richard Clark, Eagle president and CEO, in a statement.
Eagle explored multiple financing options and undertook a robust private process to monetize the asset, Clark said.
"As a result, we were able to capitalize on its value and realize substantial liquidity for the Trust," he said. "This will allow Eagle to re-deploy capital on other assets expeditiously with a view to significantly improve Eagle's sustainability and lower our payout ratio."
From a field netback standpoint, the disposition of the Permian assets means Eagle's go-forward corporate product mix moves to virtually 100% oil from about 82%, which is expected to significantly increase the Trust's average netback per barrel of oil equivalent.
Eagle's working interest production as of July 1, excluding the Permian Basin assets, was about 1,940 barrels of oil per day.
Evercore Group LLC, an independent investment banking advisory firm and affiliate of Evercore Partners, acted as exclusive financial advisor to Eagle.
The disposition is expected to close on Aug. 29, with an effective date of July 1. Eagle will receive a deposit representing roughly 5% of the disposition price.
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