Texas American announced that its affiliate TARH E&P Holdings has entered into a prepaid swap with Macquarie Bank which effectively monetized a significant portion of the proved developed producing reserves in its Big Wells field. The Big Wells field is an established waterflood with a low production decline rate making it ideally suited for such a transaction. The prepaid swap allows the Company to maintain operations of the field and have additional upside from any enhancements in the value of the asset.
The prepayment provided TARH with $15.0 million of proceeds, which will be used for development capital expenditures and to reduce existing debt. TARH entered into swaps on its oil and gas production from the Big Wells field beginning in April 2010 and continuing through year-end 2018.
David Honeycutt, President and CEO of TARC said, "The prepaid swap we arranged with Macquarie Bank generated the equivalent value for the Company as an outright asset sale, once factoring in the residual unhedged cash flow retained by the Company, while allowing us to maintain the strategic benefit of the Big Wells field as our base of operation for our higher rate-of-return oil-prone Austin Chalk and Eagle Ford Shale opportunities. We appreciate the simplicity and timely execution of the transaction on the part of Macquarie."
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