Constellation to Acquire CBM Properties in $115M Deal
Felix Dawson, chief executive officer of Constellation Energy Partners, said, "The Cherokee Basin properties are an excellent fit with our existing asset portfolio and allow us to extend our focus and geographic footprint in coalbed methane. These assets are also consistent with our target acquisition profile of long-lived, stable producing properties with low-risk drilling opportunities. We expect the acquisition to be immediately accretive to distributable cash, demonstrating our ability to execute against our commitment to increase distributions over time. The support of our sponsor, Constellation Energy, was instrumental in making this acquisition. We believe that our relationship with Constellation Energy will continue to help us achieve our growth objectives."
Operational highlights: - Estimated proved reserves 49 Bcf - Reserve life index of 17 years - Current net production of approximately 7,900 Mcfe per day - Over 550 producing wells with an average 75 percent operated production - Over 800 low-risk, low-cost drilling and recompletion opportunities on approximately 96,000 gross acres - Over 500 miles of pipeline gathering systems Financial highlights: - Expected to be immediately accretive to distributable cash flow per unit. Management will evaluate the impact of the acquisition on current distribution levels as it integrates the assets. All changes in distributions are subject to approval by the company's Board of Managers. - Incremental Adjusted EBITDA projections - Year 1 estimated - $14 to $16 million - Year 2 estimated - $20 to $25 million - Estimated annual maintenance capital of $1.5 to $3.0 million - Cash flow stability expected to be achieved by significant hedging through 2010
Constellation Energy Partners has entered into a unit purchase agreement to sell in a private placement 2,207,684 common units at a price of $26.12 per unit and 90,376 newly-created Class E units at a price of $25.84 per unit to third party investors, for aggregate cash proceeds of $60 million. The Class E units will convert into common units upon obtaining common unit holder approval. The company has undertaken to obtain this approval within 90 days after closing. Constellation Energy Partners Holdings LLC, the owner of a majority of the outstanding common units, will agree to vote its common units in favor of the conversion. The company also has agreed to file a registration statement with the SEC registering for resale the common units and common units issuable upon conversion of the Class E units within 75 days after the closing. The proceeds from this equity private placement, together with funds available under the company's revolving credit facility, will fully fund the purchase price of the acquisition from EnergyQuest Resources LP. The company anticipates that the private placement will close simultaneously with the acquisition of the assets. The private placement investor group was led by GPS Partners LLC and included Lehman Brothers MLP Partners LP and ZLP Fund LP.
Simmons & Company International and Griffis & Associates LLC acted as financial advisors to EnergyQuest Resources LP in the acquisition.
Constellation Energy Partners was formed - and is currently 54 percent owned - by Constellation Energy, an energy company with a $13 billion market capitalization.
Constellation Energy Partners LLC is a limited liability company focused on the acquisition, development and production of oil and natural gas properties, as well as related midstream assets.