Legacy Reserves LP (Nasdaq: LGCY) plans to buy Permian Basin oil and natural gas properties from Concho Resources Inc (NYSE: CXO) for $520 million in cash.
Legacy expects to close on the transaction in December and to finance the deal with proceeds from a public equity offering and borrowings from its revolving credit facility. It may also issue additional securities to finance the acquisition.
The assets include proved reserves of about 25.6 million barrels of oil equivalent (BOE), 71% of which are proved, developed, producing and 14% are proved developed, non-producing. About 15% of the proven reserves are undeveloped.
The proved reserves are about 90.5% operated and estimated to be about 62% oil and 38% natural gas. Estimated production from the current 1,584 producing wells is 5,238 BOE per day for the first three months ending March 31, 2013, which is legacy’s first expected full quarter of ownership. At that rate, the reserves-to-production ratio is 13.4 years.
The purchased properties have a significant overlap with Legacy’s current area of operations and expertise. More than 99.8% of the reserves are in the Permian Basin and the locations have 236 locations to develop future production. The estimated cash flow from operations is about $80 million from the acquired properties.
Legacy chairman, president and chief executive, said, “These assets are in some of the most prolific fields in the Permian Basin and contain proved reserves that are largely PDP, making them well-suited for our MLP model. We have identified a significant number of attractive development projects, and believe we will find additional opportunities to improve production as we have consistently done in the past. Because the assets are essentially in our backyard, we expect to benefit from our operational expertise and existing field-level infrastructure."
Legacy Reserves is a Midland, Texas-based independent oil and natural gas limited partnership which has operations in Permian Basin, Mid-Continent and U.S. Rocky Mountains. As of Dec. 31, 2011, Legacy owned interests in producing oil and natural gas properties in 498 fields primarily in the Permian Basin, Texas Panhandle, Wyoming, and Oklahoma; and non-operated interests in 3,483 gross productive wells, as well as operated 2,473 gross productive wells. The company had proved reserves of approximately 63.4 million BOE Legacy Reserves GP, LLC operates as the general partner of the partnership.
Concho, based in Midland, Texas, is an independent oil and natural gas company with operations in the Permian Basin. Concho issued a brief statement in its quarterly earnings report that the assets were not core to its operations.
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