Midstates Petroleum Company, Inc. announced that it has entered into an Asset Purchase Agreement with Eagle Energy Production, LLC, a private exploration and production company sponsored by Riverstone Holdings, LLC, to acquire all of their producing properties as well as their developed and undeveloped acreage primarily in the Mississippian Lime oil play in Oklahoma and Kansas for $325 million in cash and 325,000 shares of Series A Preferred Stock of Midstates with an initial liquidation preference value of $1,000 per share.
The transaction will be effective June 1, 2012 and closing is expected on or about October 1, 2012, subject to customary closing conditions.
Key highlights of the transaction include:
-- Adds 37.0 million barrels of oil equivalent ("Mmboe") proved reserves that are 35% oil and 23% natural gas liquids ("NGLs"), of which 35% are proved developed producing
-- Reserves being acquired have a reserve life (ratio of proved reserves to annual production) of 14.7 years
-- Acquisition includes 114 gross producing wells that are 85% operated with an average 67% working interest and 53% net revenue interest
-- Net current daily production from the properties is approximately 7,000 Boe per day
-- Adds 103,000 net acres of which 84,000 are in the Mississippian Lime play with 78,000 in Oklahoma and 6,000 in Kansas; the remaining 19,000 are in the Hunton play in Oklahoma.
-- Eagle's Mississippian Lime properties have all been developed with horizontal wells
-- Drilling and completion costs have averaged $3.7 million per horizontal well
-- The producing fields are in low cost operating areas with good access to needed infrastructure
-- Expands Midstates drilling inventory by over 600 gross drilling locations, all of which are horizontal
-- Currently utilizing three rigs in its drilling program and expects to increase to four by year-end 2012
-- Midstates will assume Eagle's hedges on its production
-- Immediately accretive to proved reserves and production per share and expected to be accretive to cash flow per share in 2014
Including the new assets, Midstates will continue to have an oil-weighted proved reserve base of approximately 63.2 Mmboe of which 45% will be oil, 20% NGLs and the remainder natural gas, and 41% of the total reserves will be proved developed. The average reserve life will increase to 11.3 years from 8.9 years.
The Mississippian Lime properties, which are located in a conventional carbonate reservoir with wells drilled to approximately 6,000 foot vertical depths, are an excellent geological and operational fit. None of the properties are subject to preferential rights, and the leases are held by production or have lease terms that will allow Midstates to protect the acreage position at a modest drilling pace. Midstates has entered into a transition services agreement with Eagle management and staff for a twelve-month period following transaction closing.
Evercore Partners, SunTrust Robinson Humphrey, and BofA Merrill Lynch served as advisors to Midstates in connection with the acquisition.
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