In this transaction Cabot will sell the properties to Phoenix Exploration Company LP for total cash consideration of $340 million. The sale is expected to close September 29, 2006, subject to due diligence and other customary closing conditions. With the total proceeds, Cabot intends to repurchase shares of common stock, fund its operations, repay a portion of its outstanding debt and pay the resulting tax bill.
At year-end 2005, the assets to be sold totaled 73 Bcfe in Cabot's proved reserve report. "Between the 2005 year-end and the August 1, 2006 effective date, Cabot identified 30 Bcfe of new proved undeveloped reserves, had 6 Bcfe of positive reserve revisions and produced 11 Bcfe making the reserves at the effective date 98 Bcfe. Due to our decision to sell these assets and our history of reconciling proved undeveloped reserves only at year-end, the reserves to be sold aggregate 68 Bcfe on Cabot's books at the effective date," stated Dinges.
"For the last year, as we have spoken about our move toward a more predictable portfolio of opportunities, we have been asked repeatedly about selling these reserves," said Dinges. "We received significantly more value for these reserves than their current valuation within our Company as indicated by our current stock price."
The assets averaged 49.4 Mmcfe per day of production for the first seven months of this year. Subsequent to the sale, Cabot's total proved reserve portfolio and its production profile will be approximately 96 percent natural gas.
"With this sale, the Company still expects to show year-over-year production growth in absolute terms," stated Dinges. "On a pro forma basis, removing the sold production from this year and all of last year, the growth rate for production will be double digits for 2006. New guidance has been posted for the Gulf Coast on our website for 2006, with guidance for 2007 to be provided at the third quarter teleconference," added Dinges.
The Company was assisted in this transaction by Goldman, Sachs & Co. and Fulbright & Jaworski, L.L.P.
Most Popular Articles
From the Career Center
Jobs that may interest you