2010-11-09-2010-11-02-2010-12-08

Transaction Type
Announce Date
Post Date
Close Date
Estimated Price
$43.7MM
Description

Bought N TX Barnett & Boonsville properties, gaining 5.6 MMcfe/d, 26.4 Bcfe proved.

Privately held, Houston-based Milagro Producing LLC has acquired substantially non-operated North Texas Barnett shale and Boonsville gas-producing properties from RWG Energy Inc., a subsidiary of Ram Energy Resources Inc., Tulsa, Okla., (Nasdaq: RAME) for $43.7 million in cash.

The properties consist of Ram's interest in its shallow gas, Bend Conglomerate properties and its deeper Barnett properties principally in Jack and Wise counties. Production during the second quarter averaged 5.6 million cubic feet of gas equivalent per day, composed of 2.5 million cubic feet of gas, 465 barrels of gas liquids and 50 barrels of oil.

Proved reserves are approximately 26.4 billion cubic feet equivalent. This represents 13% of Ram's year-end 2009 proved reserves of 204 billion cubic feet equivalent. The properties also represent 10% of Ram's field operating cash flow during the second quarter.

Due to Ram's outlook on the price of gas and its nonoperated position in a number of these properties, Ram was not planning to focus a substantial portion of its capital expenditures in the near-to-intermediate term on these assets.

The sale represents the first asset sale to be effected pursuant to Ram's review of strategic alternatives. As a result of the sale and application of proceeds, Ram's effective liquidity has improved by approximately $12.1 million.

As of Sept. 30, the company had bank debt outstanding of $246.7 million, composed principally of a balance outstanding under its revolver of $133.5 million and a balance outstanding under a term loan of $113.2 million. RAM will used proceeds of $16 million to reduce the outstanding balance on its revolving credit facility. The remaining net proceeds will be used to reduce the outstanding balance on the company's term loan.

As a result of the reduction in collateral represented by the asset sale, RAM's $165-million borrowing base has been reset by lenders at $145 million.

Ram's actual production of crude and natural gas liquids (NGLs) as a percent of total barrels of oil equivalent production (BOE) reported in third-quarter 2010 was 63%. Assuming production from the asset sale was absent for the entire third quarter, the proportion of crude and liquids would have risen to 64% of total BOE produced in that period. Similarly the percent of total revenues represented by oil and NGLs would have been 83%, compared with the actual 81% reported in third-quarter 2010.

Jefferies & Co. Inc. is financial advisor to Ram.

The deal closed on Dec. 8. The effective date was Oct. 1.