American Energy - Permian Basin, LLC Provides Financial and Operational Update; Agrees to Acquire Net Production of Approximately 1,400 BOE Per Day and 27,000 Net Acres in the Wolfcamp Shale Play of the Central Midland Basin

OKLAHOMA CITY, Oct. 28, 2014 /PRNewswire/ -- American Energy – Permian Basin, LLC (AEPB), an affiliate of American Energy Partners, LP (AELP), today announced that since July 31, 2014 it has completed or entered into definitive agreements with multiple parties to acquire net production of approximately 1,400 barrels of oil equivalent (boe) per day and approximately 27,000 net acres of leasehold in the Wolfcamp Shale play in the central Midland Basin.  These assets are located primarily in Reagan County, Texas, and will be acquired for an aggregate purchase price of approximately $726 million.  On a net effective acre basis, AEPB is acquiring approximately 110,000 net acres and after giving effect to the value of the acquired production, AEPB is acquiring its new leasehold for approximately $6,000 per net effective acre.

With the addition of these assets to its existing leasehold position of 63,000 net acres, AEPB believes it will have established one of the industry's premier leasehold positions in the Wolfcamp Shale play in Reagan County.  AEPB anticipates financing the transactions with proceeds from a privately-placed offering of exchangeable notes to institutional investors during the next 60 days.  The pending acquisitions are expected to close by year-end 2014, subject to completion of customary due diligence and satisfaction of other closing conditions.  Subject to market conditions, AEPB currently anticipates that it will pursue an initial public offering in the next 12 months.

Acquisition and Company Highlights:

• Including the 27,000 net acres discussed above, AEPB owns approximately 90,000 net acres in the Wolfcamp play, which it believes equates to approximately 245,000 net effective acres.
• On this 245,000 net effective acres, AEPB estimates it will be able to drill approximately 2,700 gross (2,300 net) horizontal drilling locations in the Wolfcamp A, B and C intervals, of which approximately 90% are located in Reagan County. AEPB believes there are significant additional potential development opportunities in the lower Spraberry, Cline and Atoka intervals.
• Across its leasehold, the company uses multiple type curves.  For the company's core Wolfcamp A and B wells, AEPB expects that its wells will recover approximately 527 thousand barrels of oil equivalent (mboe) per well on a two-stream basis and 579 mboe on a three-stream basis at a current cost of approximately $8.45 million, an expected 2016 cost of $7.25 million and an expected 2017 and beyond cost of $7.0 million.  A well with this estimated ultimate recovery is expected to have a two-stream 30-day average initial production (IP) rate of 647 boe per day.
• Following the closing of the transactions, AEPB will have proved reserves of approximately 158 million boe.
• AEPB is targeting to produce an average of approximately 33-38 mboe per day during 2015, of which approximately 70-75% is expected to be oil.
• AEPB is currently operating five horizontal drilling rigs and anticipates increasing its operated horizontal rig count to 12 rigs by year-end 2015.
• AEPB employs approximately 95 net full time employees and has offices in Oklahoma City, Midland, TX and Big Lake, TX.

As a result of growth in the proved reserves of its initial asset base, AEPB also announced that it has received commitments for the borrowing base under its revolving credit facility to increase from $500 million to $650 million upon the closing of pending acquisitions.

Further, AEPB has increased its oil hedging position and now has hedges providing downside price protection on oil production covering approximately 8,000 barrels per day during the 2014 fourth quarter (an estimated 68-72% of projected oil production) at an average price of $94.51 per barrel and approximately 11,000 barrels per day during 2015 (an estimated 40-45% of projected oil production) at an average price of $93.64 per barrel.

Well Result Highlights:

AEPB also announced strong initial well results from its horizontal Wolfcamp drilling program in Reagan County since taking over ownership of the Enduring assets on July 31, 2014.  Selected results from its newly completed wells are provided below:

The Halfmann 1214 01H generated a peak 24-hour IP rate of 1,796 boe per day and a 30-day average IP rate of 936 boe per day (83% oil).  Located in central Reagan County, the well targeted the Wolfcamp A zone with a stimulated lateral length of approximately 8,500 feet.

The Loftin Hughes 13-1212 01H generated a peak 24-hour IP rate of 1,594 boe per day and a 30-day average IP rate of 980 boe per day (78% oil).  Located in central Reagan County, the well targeted the Wolfcamp A zone with a stimulated lateral length of approximately 7,500 feet.

The Cope 107 3H generated a peak 24-hour IP rate of 1,363 boe per day and a 30-day average IP rate of 877 boe per day (78% oil).  Located in northeastern Reagan County, the well targeted the Wolfcamp A zone with a stimulated lateral length of approximately 10,000 feet.

The Cope 107 1H generated a peak 24-hour IP rate of 1,321 boe per day and a 30-day average IP rate of 755 boe per day (78% oil).  Located in northeastern Reagan County, the well targeted the Wolfcamp A zone with a stimulated lateral length of approximately 10,000 feet.

These wells are all tracking at or above the 647 boe per day first 30 day average production rate for AEPB's 527 mboe type curve, which is normalized to a 7,500-foot stimulated interval.

AEPB anticipates providing its financial and operational results for the period ending September 30, 2014 on Monday, November 11, 2014 to investors.

AEPB's lead equity investor is The Energy & Minerals Group (EMG), with additional equity provided by First Reserve, AEPB's management team and others.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

This press release contains forward-looking statements.  Forward-looking statements express views regarding future plans and expectations.  They include statements that include words such as "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend" and similar words or expressions, although not all forward-looking statements contain such identifying words.

Forward-looking statements in this press release include, but are not limited to, statements regarding acquisitions, future capital markets activities, future operations and operating costs, business strategy, future values of anticipated reserves and future production.  These statements are based on numerous assumptions and are subject to known and unknown risks and uncertainties, many of which are beyond our control.  These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes and the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, cash flow and access to capital.  Actual future results may vary materially from those expressed or implied in these forward-looking statements, and AEPB's business, financial condition and results of operations could be materially and adversely affected by numerous factors, including such known and unknown risks and uncertainties.  As a result, forward-looking statements should be understood to be only predictions and statements of our current beliefs, and not as guarantees of performance.

All of the forward-looking statements in this press release are qualified by risks, including those risks related to our ability to: complete acquisitions and successfully transition acquired businesses and assets to the management and control of AEPB; access the capital markets on terms acceptable to us or at all; execute on future drilling plans; hold our leasehold by production and convert reserves into production on an economic basis; manage rapid growth; to realize attractive oil, NGLs and natural gas prices; develop a successful marketing plan for the oil, NGLs and natural gas produced by AEPB; successfully identify and acquire additional productive leasehold; recruit and retain appropriately qualified personnel; effectively utilize technology, to execute our drilling program; obtain sufficient time and attention of AEPB Services, LLC, which manages AEPB's business; mitigate credit risk posed by significant customers; respond to intense competition in the onshore E&P industry; respond to shifting and increasing government regulatory requirements with respect to unconventional resource recovery, including hydraulic fracture stimulation; accurately predict the timing of infrastructure development (including long-haul pipelines) and tie-in of wells; accurately predict the timing and amount of future production of oil, NGLs and natural gas; access water, sourcing, distribution and disposal systems; generate sufficient cash flow to pay fixed charges; control our operating expenses and other costs; execute on our financial strategy and access the capital required for our development program; implement our hedging strategy and deliver expected results; navigate through general credit market and economic conditions; and to avoid material legal or environmental liabilities.

This press release provides disclosure of the proved reserves of AEPB and of certain assets to be acquired by AEPB that is derived from third-party reserve reports. Proved reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.  Drilling locations have not been risked by AEPB management. Actual locations drilled and quantities that may be ultimately recovered from the interests of AEPB will differ substantially. There is no commitment by AEPB to drill all of the drilling locations that have been attributed to these quantities. Factors affecting ultimate recovery include the scope of the ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors, and actual drilling results, including geological and mechanical factors affecting recovery rates. The production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases.

About American Energy – Permian Basin, LLC:

American Energy – Permian Basin, LLC is an independent oil and natural gas company affiliated with American Energy Partners, LP focused on the acquisition, development and production of unconventional oil and natural gas reserves in the Wolfcamp Shale play in Central Midland Basin of the Permian Basin in West Texas.

About American Energy Partners, LP:

American Energy Partners, LP was founded by Aubrey K. McClendon in April 2013 to capitalize on opportunities available in unconventional resource plays onshore in the U.S. For additional information, please visit www.americanenergypartners.com.

About The Energy & Minerals Group:

EMG is the management company for a series of specialized private equity funds. The Firm was founded by John Raymond (majority owner and CEO) and John Calvert in 2006. EMG focuses on investing across various facets of the global natural resource industry including the upstream and midstream segments of the energy complex. EMG has approximately $17.5 billion of regulatory assets under management (RAUM) and approximately $7.9 billion in commitments have been allocated across the energy sector since inception. For additional information, please visit www.emgtx.com.

About First Reserve:

First Reserve is the largest global private equity firm exclusively focused on energy. With over 30 years of industry insight, investment expertise and operational excellence, the Firm has cultivated an enduring network of global relationships and raised more than $30 billion of aggregate capital since inception. First Reserve has completed more than 475 transactions (including platform investments and add-on acquisitions), and its portfolio companies have significant operations on six continents.  These operations span the energy spectrum from upstream oil and gas to midstream and downstream, including resources, equipment and services and infrastructure. For additional information, please visit www.firstreserve.com.

SOURCE American Energy Partners, LP

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