Carrizo Oil & Gas announced Friday that it has entered into a definitive agreement to sell a portion of its properties in the Barnett Shale to a subsidiary of Atlas Resource Partners for $190 million in cash.
This sale will have an effective date of January 1, 2012, and is expected to close in late April, subject to customary closing conditions and purchase price adjustments.
The producing properties that are being sold include 221 gross (approx. 110 net) wells currently producing at an approximate net rate of 35 MMcfe per day (predominantly dry gas).
Estimated total proved reserves associated with the Divested Properties, as determined by Carrizo’s third party engineer at year-end 2011, is approximately 312 Bcfe (comprised of 177 Bcfe of proved developed and 135 Bcfe of proved undeveloped reserves), of which 53 Bcfe are non-operated.
The Company intends to use the net proceeds from this sale to repay borrowings under its revolving credit facility and use the excess proceeds to partially fund its 2012 capital expenditures plan, largely in the Eagle Ford play. Carrizo estimates that when its borrowing base is redetermined (scheduled for April) it will be around $300 million after adjusting for:
- the impact of the Divested Properties
- the significant benefit from oil/liquids developed reserve additions in the first quarter 2012 (largely related to the Eagle Ford development)
EBITDA from the Divested Properties will continue to be included in Carrizo’s financial results until closing in late April.
“Our corporate strategy has been to focus our capital expenditures on the highest return plays such as our liquids-rich Eagle Ford and Niobrara properties. We have significantly slowed the pace of development of our dry gas properties in the Barnett Shale due to low natural gas prices,” commented Carrizo President and CEO S. P. “Chip” Johnson IV. “However, we had several strong indications of interest in this quality gas asset and are pleased to be able to announce this sale to Atlas.
The resulting increase in liquidity generated by the sale of these properties will increase our flexibility to fund our announced 2012 capital investment plan that is focused on investment in liquids-rich resource plays while maintaining appropriate debt levels on our revolver.”
Credit Suisse and Baker Botts LLP acted as Carrizo’s financial adviser and legal adviser on this transaction, respectively.
