Resolute Energy Corp. (NYSE: REN) shifted a shovelful of dirt March 30, dealing Permian Basin assets as it tries to dig itself out from under a heap of debt.
The Denver-based company said it entered into an agreement to sell certain noncore assets in the Midland Basin in West Texas. The properties will be sold to a private party for about $42 million.
The divested assets consist of operated and nonoperated properties primarily located in Howard County, Texas.
"Overall, the sale is small but positive news, but given the level of debt outstanding, there is still more work for REN to do," said David Tameron, senior analyst, Wells Fargo Securities LLC, in a report.
As of year-end 2014, the company had $785 million of outstanding debt. Its revolving credit facility, with a borrowing base of $330 million, is expected to be reduced during the next redetermination by March 31. The company’s market cap is $41.5 million.
Proceeds from the divestiture will be used to reduce debt, initially by reducing amounts outstanding under the company's revolving credit facility.
Resolute controls about 37,900 gross (25,900 net) acres in the Permian Basin in Texas and New Mexico. It operates an aggregate of 175 gross (146.7 net) wells in the region.
"This transaction represents the first step in our previously announced plan to pursue noncore asset sales to reduce debt and improve our liquidity,” said Nicholas J. Sutton, Resolute's chairman and CEO, in a statement.
Sutton said earlier this month that the company was investigating alternatives to increase activity in its asset base including the potential to undertake joint ventures to drill wells on the company's acreage.
The company will provide a more detailed breakdown of the assets sold and the production and cost impact on Resolute for the calendar year 2015 in the coming weeks, Sutton said.
The transaction has an effective date of March 1 and is expected to close by May 1. The sale is subject to customary conditions and purchase price adjustments, including for title and environmental defects.
Board Changes
Resolute also announced that William H. Cunningham and Robert M. Swartz resigned from their positions on the board of directors effective March 25. Both Cunningham and Swartz had served on the board of the company since 2009 when Resolute merged with Hicks Acquisition Co.
As of the date of these resignations, the number of directors constituting the board was reduced to six, including four independent directors.
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