FourPoint Energy, LLC announced today the signing of definitive agreements to acquire oil and gas assets from Chesapeake Exploration L.L.C. and CHK Cleveland Tonkawa L.L.C., whose preferred interest owners are funds managed by GSO Capital Partners LP, as well as other third party investors, and common interest owner CEX in three related transactions for a combined purchase price of $840 million, with incremental and contingent payments payable to the Preferred Holders upon certain commodity price and performance conditions. In addition, the Preferred Holders will receive a distribution of cash on hand and working capital of CHK Cleveland Tonkawa L.L.C. The assets to be acquired include an interest in approximately 1,500 producing wells primarily in the Cleveland, Tonkawa and Marmaton formations with average daily net production of approximately 21,500 Boed over the twelve months ended April 2015. The production mix is 7,000 Bbld of oil, 5,000 Bbld of natural gas liquids and 57 Mmcfd of natural gas. The assets cover nearly 250,000 net acres centered in Roger Mills and Ellis counties, Oklahoma. Approximately ninety-five percent of the leasehold is held by production. FourPoint will assume full operations of the assets at closing which is anticipated to be August 31, 2015.
George Solich, President and CEO of FourPoint said “The acquisition complements FourPoint’s current acreage footprint and boosts our inventory by adding a significant amount of operated, oily locations in formations largely unrepresented in our current portfolio. Additionally, the assets to be acquired include a large base of production which strengthens our cash flow profile in this uncertain commodity price environment. The acquired assets will be instrumental in our ongoing efforts to build a world class portfolio of oil and gas assets in the Western Anadarko Basin.”
The acquisition will be funded by $619 million in FourPoint Holdings equity issued to funds managed by GSO Capital Partners and cash drawn from existing FourPoint Energy credit facilities. Tad Herz, Executive Vice President and CFO said, ‘The structure of this transaction strengthens FourPoint’s balance sheet and provides significant liquidity to pursue future development and acquisition activity. The new equity issued to GSO Capital Partners as consideration for the transaction allows FourPoint to maintain a balanced debt to equity capital structure and allows for GSO to share in future upside potential on the assets.’
Kamil Tazi, Executive Vice President and COO added “Chesapeake has developed this asset by drilling and completing over 190 horizontal wells since 2012. Anticipating this transaction, Chesapeake halted its development plans and eliminated the active rigs working in this area in the first quarter of 2015. As FourPoint assumes operations, we plan to build back up to their previous momentum and continue to reduce drilling and completion costs while maximizing ultimate recoveries. FourPoint is eager to leverage the knowledge that Chesapeake has developed through their drilling program with our extensive technical expertise in the area to position the company to grow production and cash flow.”