The Company said it plans to allocate $120.0 million of the purchase price to the proved reserves and the remaining $30.0 million to the upside, including the probable reserves and the prospect inventory. The Company also said that it expected the acquisition to be immediately accretive to earnings and cash flow per share. The deal is anticipated to close on January 20, 2005, subject to closing conditions and adjustments and the effect of the exercise of preferential rights by third parties.
Richard A. Bachmann, EPL's Chairman, President, and CEO, remarked, "This acquisition takes EPL into a new core area, onshore south Louisiana, where our staff has a wealth of experience. We will also step right into an ongoing two rig drilling program, so we expect an immediate impact not just on our reserves but also on our exploratory activity in 2005. Our partnership in this prolific area on the northern side of the Terrebonne Trough will be particularly exciting as we extend EPL's knowledge of productive deep sediments on the Gulf of Mexico Shelf onshore into Louisiana.
As part of the transaction, EPL is acquiring an inventory in the same area initially composed of 22 prospects scheduled for drilling in 2005 with a total net unrisked reserve potential of 29.5 Bcfe (15.3 Bcfe net risked). The Company has also entered into a two-year agreement with the seller of the properties that defines an area of mutual interest (AMI) encompassing over one million acres. EPL intends to continue to explore and develop oil and gas reserves in the AMI over the next two years in partnership with the seller. Both the proved reserves and the AMI are in the southern portions of Terrebonne, Lafourche, and Jefferson Parishes in Louisiana.
EPL estimates that the net proved reserves associated with the properties are approximately 54.2 Bcfe (86% natural gas) as of November 1, 2004, with additional probable reserves of 9.1 Bcfe. The acquisition consists of nine fields, four of which are currently producing a total of approximately 16.9 Mmcfe per day net to EPL. The Company plans to hedge projected production from proved reserves in the acquisition through year end 2007, using zero-cost collars with floors between $4.50 and $5.00 per million BTUs.
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