OKLAHOMA CITY, Nov. 24, 2014 /PRNewswire/ -- American Energy – Permian Basin, LLC (AEPB), an affiliate of American Energy Partners, LP, today announced the initial closing of an offering by its immediate parent, American Energy Permian Holdings, LLC (AEPH), of $515 million of 8.0% Exchangeable Junior Subordinated Notes due 2022 (Notes), the net proceeds of which are being contributed to AEPB in exchange for preferred units. In addition, AEPB today closed on a major acquisition of assets from Tall City Exploration LLC (Tall City), which is backed by private equity sponsor Denham Capital Management, LP, for $440 million, in cash and Notes. The assets include approximately 14,000 net acres of leasehold primarily located in Reagan County, Texas and 1,400 barrels of oil equivalent (boe) per day of production.
The Notes were offered and are being issued in a series of separate, but related, transactions, consisting of: (i) approximately $250 million in aggregate principal amount of Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended; (ii) approximately $156 million in aggregate principal amount of Notes to Tall City as partial consideration for the Tall City acquisition; (iii) approximately $26 million in aggregate principal amount of Notes to Aubrey K. McClendon and other members of AEPB's management; and (iv) approximately $83 million in aggregate principal amount of Notes to one or more affiliated funds managed by AEPB's sponsors, The Energy & Minerals Group and First Reserve Management LP.
The issuance of Notes to Tall City and Mr. McClendon and other members of management settled concurrently with the delivery of Notes to qualified institutional buyers. The purchase of Notes by the sponsors is expected to close by December 5, 2014.
Including the Tall City acquisition, since July 31, 2014, AEPB has closed, or plans to close by year-end 2014, the acquisition of approximately 28,000 net acres of leasehold in the Wolfcamp Shale play in the Central Midland Basin, or approximately 115,000 acres on a net effective acre basis, 1,400 boe per day of production, and 49 mmboe of proved reserves, primarily located in Reagan County, Texas, for a total purchase price of approximately $720 million. The final purchase prices of the acquisitions are subject to further customary post-closing adjustments. AEPB will fund the acquisitions with proceeds from the sale of the Notes contributed to it by AEPH and cash on hand.
Pro forma for the acquisitions expected to be completed by year-end, AEPB estimates it will have approximately 91,000 net acres in the Wolfcamp Shale play in the Central Midland Basin, or approximately 248,000 acres on a net effective acres basis, more than 17,000 boe per day of current production, 158 mmboe of proved reserves and approximately 2,700 gross wells to be drilled in the future.
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 acquired by AEPB that are 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 $17.1 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.
About Tall City Exploration, LLC
Tall City Exploration, LLC is a Denham Capital-backed exploration and production oil and gas company headquartered in Midland, Texas with an additional office in Houston. The company's primary activities include the pursuit of acquisitions and the exploration and development of upstream oil and gas assets in the Permian Basin of West Texas. Prior to the transaction, Tall City had approximately 84,000 net acres under lease and produced over 4,000 net boe per day. For more information about Tall City Exploration, visit www.tallcityexp.com.
About Denham Capital
Denham Capital is a leading energy and resources-focused global private equity firm with more than $7.9 billion of invested and committed capital across seven fund vehicles and offices in Houston, London, Boston, Sao Paulo and Perth. The firm makes direct investments in the energy and resources sectors, including businesses involving oil and gas, power generation and mining, across the globe and all stages of the corporate lifecycle. Denham's investment professionals apply deep operational and industry experience and work in partnership with management teams to achieve long-term investment objectives. For more information about Denham Capital, visit www.denhamcapital.com.
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SOURCE American Energy Partners, LP