Mariner Energy Inc. has won a bidding auction to acquire the bankrupt operations of natural gas-weighted Edge Petroleum Corp. in a transaction valued at $215 million. The transaction, set to close by the end of the month, has been approved by the bankruptcy court in which Edge's Chapter 11 case is pending, which will allow Mariner to build its presence onshore.
Edge, whose portfolio extends from the Gulf Coast to the Permian Basin and Fayetteville Shale, filed for voluntary bankruptcy protection two months ago (see NGI, Oct. 5). More than 80% of Edge's reserves are in South Texas, which would establish a new core area for Mariner. Most of Mariner's operations are in the Permian Basin and the Gulf of Mexico deepwater and Outer Continental Shelf.
"Consistent with our stated strategy of expanding our onshore presence, the Edge transaction establishes a new core area for the company," said Mariner CEO Scott D. Josey. "Based on year-end 2008 results, the combination results in more than half of Mariner's proved reserves being onshore."
Almost half of Edge's South Texas reserves are in the Flores/Bloomberg Field in Starr County, TX. Edge, based in Houston, also has almost 70,000 net undeveloped acres, primarily in Texas and New Mexico. The properties are 72% weighted to natural gas and 28% to liquids.
Edge reported year-end 2008 estimated proved reserves of 124 Bcfe. At the end of this year the Edge properties are expected to include 106 Bcfe in estimated proved reserves, 70% of which are developed, according to Mariner's estimates. Edge's total 3Q2009 production averaged around 29 MMcfe/d.
The transaction was structured to preserve certain tax attributes of the Edge subsidiaries, including the tax basis of the assets acquired and net operating losses, Mariner said. The potential value of these tax attributes is about $95 million.
"The economic metrics of the transaction are compelling, potentially further enhanced by the preservation of the tax attributes," said Josey. "We expect the assets to generate excess cash flow while self-funding future development costs."
The assets to be acquired by Mariner, also based in Houston, include all of Edge's ownership interest in its direct and indirect subsidiaries, including Edge Petroleum Exploration Co., Miller Exploration Co., Edge Petroleum Operating Co. Inc., Edge Petroleum Production Co. and Miller Oil Corp. Edge's personnel were expected to be offered positions with Mariner, Josey said.
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