FourPoint Energy LLC, a privately held exploration and production (E&P) company based in Denver, plans to more than double its position in the Anadarko Basin, after agreeing to purchase producing oil and natural gas assets in Western Oklahoma from Chesapeake Energy Corp. units for $840 million.
In a statement Wednesday, FourPoint said it signed definitive agreements with subsidiaries Chesapeake Exploration LLC (CEX) and CHK Cleveland Tonkawa LLC (CHK) to acquire an interest in about 1,500 producing wells primarily targeting the Cleveland, Tonkawa and Marmaton plays.
Average daily net production from the wells totaled about 21,500 boe/d over the 12-month period that ended in April, FourPoint noted. That figure includes 7,000 b/d of oil, 5,000 b/d of natural gas liquids (NGL) and 57 MMcf/d of natural gas.
FourPoint said the assets to be acquired are spread over nearly 250,000 net acres in Oklahoma's Ellis and Roger Mills counties, and nearly all (95%) of the leasehold is held by production. The deal is expected to close by the end of August, and FourPoint would serve as operator.
Pro forma for the acquisition, and prior to customary adjustments after closing, FourPoint will hold more than 400,000 net acres in the western Anadarko Basin, with net production of 260 MMcfe/d from about 4,600 gross wells. Half of production is gas-weighted, the other half is oil and NGLs.
According to FourPoint's website, the exploration and production company was founded by the leaders of Cordillera Energy Partners after it was sold to Apache Corp. for $2.85 billion in early 2012 (see Shale Daily, Jan. 24, 2012). George Solich, an oil and gas magnate who also led Energy IV LLC, the precursor to FourPoint -- serves as president and CEO (see Shale Daily,Aug 12, 2013).
"The acquisition complements FourPoint's current acreage footprint and boosts our inventory by adding a significant amount of operated, oily locations in formations largely unrepresented in our current portfolio," Solich said. "Additionally, the assets to be acquired include a large base of production which strengthens our cash flow profile in this uncertain commodity price environment.
"The acquired assets will be instrumental in our ongoing efforts to build a world class portfolio of oil and gas assets in the western Anadarko Basin."
According to FourPoint COO Kamil Tazi, Chesapeake developed the asset by drilling and completing more than 190 horizontal wells since 2012. In anticipation of the transaction with FourPoint, Chesapeake stopped drilling and removed its active rigs from the area in 1Q2015.
"As FourPoint assumes operations, we plan to build back up to their previous momentum and continue to reduce drilling and completion costs while maximizing ultimate recoveries," Tazi said. "FourPoint is eager to leverage the knowledge that Chesapeake has developed through their drilling program with our extensive technical expertise in the area to position the company to grow production and cash flow."
FourPoint's announcement said the agreements with CEX and CHK -- whose preferred interest owners are funds managed by GSO Capital Partners LP, as well as other third party investors, and collectively identified as "preferred holders" -- as well as common interest owner CEX, equated to a combined purchase price of $840 million.
The deal includes incremental and contingent payments payable to the preferred holders upon certain commodity price and performance conditions. The preferred holders are to also receive a distribution of cash on hand and working capital of CHK.
FourPoint said the acquisition would be funded by $619 million in FourPoint Holdings equity issued to funds managed by GSO and cash drawn from the company's existing credit facilities.