Houston oil and gas explorer Oasis Petroleum Inc. said Thursday it had signed four separate and unrelated purchase and sale agreements to acquire properties in the Williston Basin of North Dakota totaling 161,000 net acres for $1.515 billion.
Zenergy Inc. is the seller of the biggest chunk, 136,000 net acres in and around Oasis' position in the West Williston project area for $1.45 billion, according to people familiar with the industry. One of the sellers for the three other unrelated purchase and sale agreements, which include properties in the East Nesson totaling 25,000 net acres for $65 million, was Magnum Hunter Resources Corp., those sources said. Magnum Hunter revealed in a regulatory filing Wednesday that it had sold a package in Burke County, N.D., to Oasis for $32.5 million in cash.
Oasis said the acquisitions will give it 492,000 net acres in the area, up 50%, with reserves of 169.9 million barrels of oil equivalent and production of 43,000 barrels of oil equivalent per day based on internal operational reports.
RBC Capital Markets LLC analyst Scott Hanold wrote in a note Thursday that Oasis paid a very reasonable price for the assets. Oasis' stock price rose 4.67% on the news to $41.45 at one point in morning trading.
Oasis expects to close the four acquisitions in early October if they clear due diligence and closing conditions. The agreements are subject to purchase price adjustments depending on the closing date.
"These acquisitions add high quality acreage in the heart of the Bakken and Three Forks play, providing incremental scale to our premier position in the Williston Basin," Oasis CEO Thomas Nusz said in a statement. On a conference call with analysts and investors, Nusz said the deal will make Oasis one of the biggest players in the Williston Basin and the Bakken overall. Management didn't say who the sellers were or how long the sales process had been going on.
Nusz added that Oasis is operating 11 rigs and the sellers are operating two rigs, which it believes will keep acquisition production levels relatively flat through the end of the year. But the company expects to accelerate development across its combined position next year, increasing to 15 to 16 operated rigs by the end of 2014. "We are not only excited about the near-term value of this deal, but the outlook over the long-term is extremely compelling," he said.
Oasis announced that the lenders under its revolving credit facility completed their regular semiannual redetermination of the borrowing base, resulting in an increase to $1.5 billion from $1.250 billion based on Oasis' reserves as of June 30. Oasis also added four new lenders to the bank group, which it didn't name.
As of Wednesday, Oasis said it had $100 million of borrowings under its revolving credit facility and $5.2 million of letters of credit, which reduces the borrowing capacity of the revolving credit facility, and cash and cash equivalents of $198.6 million.
CFO Michael Lou said on the conference call that the company had adequate resources to finance the acquisitions and may fund part of them in the high-yield markets. He said the company is near cash flow breakeven and hopes to be cash flow positive soon, which it will use to delever "pretty rapidly."
Management said they hope to pick up some of the sellers' employees on the properties.
Sources familiar with the deals said DLA Piper LLP (US) counseled Oasis Petroleum with a team led by Jack Langlois. Nickolas Lorentzatos is Oasis' general counsel.
Tudor, Pickering, Holt & Co. Securities Inc. advised the sellers, including Maynard Holt and Tim Sulser.
Former Commodity Futures Trading Commission Commissioner Bart Chilton brings his saucy eloquence to DLA Piper as a senior adviser in Washington. For other updates launch today's Movers & shakers slideshow.
The activist investor and the famed auction house are headed for a courtroom showdown. Loeb wants three board seats and the ability to fire Sotheby's CEO William Ruprecht. The company responded with a $300 million dividend for shareholders and a poison pill aimed squarely at Loeb. More video