Legacy Reserves has entered into an agreement to purchase working interests in 13 operated oil fields in the Big Horn and Wind River Basins of Wyoming for $130 million in cash. The properties produce 1,478 Boepd, of which 93% is oil. Proved reserves are estimated to be 8.8 MMBoe, 90% of which is considered proved developed producing ("PDP"). We expect future potential for tertiary recovery in some of the fields. The closing is anticipated to occur in February 2010 and is subject to customary purchase price adjustments.
Legacy has existing ownership in the Big Horn Basin pursuant to an operating contract with Iron Creek Energy Group based in Cody, Wyoming. Iron Creek will be providing support to Legacy in the operation and administration of the Wyoming properties similar to Iron Creek's current support to Legacy in the Homestead Field in Wyoming and the East Binger Unit in Oklahoma.
Legacy plans to finance the acquisition with its existing credit facility, and has requested an interim borrowing base redetermination to include the collateral value of properties to be acquired.
The seller of the properties is St. Mary Land & Exploration Company, based in Denver, Colorado. The properties represent a portion of their previously announced Rocky Mountain oil property divestiture.
Cary Brown, Chairman and CEO, commented, "These long-lived Wyoming oil reserves are an excellent fit for our MLP. The PDP reserve-to-producing ratio is 15 years, and the production rate is stable and predictable. Furthermore, adding Wyoming as one of Legacy's core operating areas gives Legacy another geographic growth area and we expect this acquisition to be a springboard for additional acquisitions."
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