EPL Oil & Gas Inc. (EPL) announced it has executed a purchase and sale agreement to acquire certain shallow water Gulf of Mexico (GOM) shelf oil and natural gas interests from Hilcorp Energy GOM Holdings LLC for $550 million.
The assets are currently producing approximately 10,000 BOE/d, about 50% of which are oil. Estimated proved reserves are approximately 36.3 MMBOE, 54% of which are oil. The properties include three fields that Hilcorp had acquired from Chevron Corp. in Ship Shoal Block 208, South Pass 78, and South Marsh Island 239, which are all on the Central GOM shelf in the vicinity of EPL's existing core field areas. These three fields account for 64% of the current proved reserves, and approximately 82% of the total proved acquisition PV10 value estimated at $626 million.
The currently estimated asset retirement obligation to be assumed by EPL in the acquisition is expected to total approximately $120 million.
Gary Hanna, EPL's president and CEO commented, "This is the fourth acquisition we have made since 2011, and it is the most transformational. This accretive acquisition provides scale and diversification while continuing to focus the value of our company in the central gulf, which is the most prolific, oil bearing region of the GOM.”
Hanna continued, "This transaction nearly doubles our proved reserves to approximately 74 MMBOE. Additionally, it drives our production above 20,000 BOE/d, supports EBITDAX generation in 2013 in the range of $450 million to $500 million and is very accretive to our key operational and valuation metrics. This transformational acquisition fits all of our acquisition criteria."
In addition to utilizing cash on hand to finance the purchase, EPL has obtained committed financing from Bank of Montreal to complete the transaction, including an increase in its senior secured credit facility from $250 million to $750 million.
Additionally, Bank of Montreal and BMO Capital Markets have provided the company a commitment for $200 million in the form of a senior unsecured bridge loan, which is expected to remain unutilized as the company plans to access the high yield market for permanent financing before the anticipated closing date in late October.