American Energy Appalachia Holdings LLC (AEA), an affiliate within Aubrey McClendon's platform of U.S. onshore operators, is changing its name and plans to become fully independent by the end of the year.
Ascent Resources LLC would remain headquartered in Oklahoma City and continue to be run by CEO Jeff Fisher, a McClendon protege who was on the executive team at Chesapeake Energy Corp. McClendon also would remain a major financial backer.
Repositioning as Ascent "marks an extremely important day in the life of our company," Fisher said. He pointed to AEU's other news, an agreement Tuesday to sell some Utica Shale leasehold to Gulfport Energy Corp. for $407 million (see related story). The assets weren't scheduled for near-term development and are a "better fit" for Gulfport.
The dual transactions would "place Ascent on strong footing from a liquidity standpoint and allow the company to continue to develop its tremendous asset base," Fisher said. "We have what I believe are some of the very best assets in the Appalachian Basin and, therefore, the entire country."
The management team worked for two years to create a leasehold position and build a team with "operational talent to grow production, reserves and cash flow," Fisher noted.
McClendon, who was forced out at Chesapeake in 2013, led the formation of American Energy Partners LP (AEU) later that year and then expanded with other onshore affiliates, including for the Utica and Marcellus shales. American Energy-Utica LLC and American Energy-Marcellus LLC were merged earlier this year and became units of AEA (see Shale Daily, Jan. 5).
Private equity shareholders in the Appalachia business included McClendon and frequent financiers The Energy & Minerals Group (EMG) and First Reserve. The primary equity owners in Ascent won't change, AEU stated.
Once the Gulfport sale is completed, Ascent expects to have about 1.8 Tcfe of estimated proved reserves, 73% weighted to natural gas, and 235,000 net acres in Ohio's Utica and West Virginia's Marcellus plays. Ascent has about 190,000 net acres in eastern Ohio and 45,000 net acres in northern West Virginia. Current estimated production is 280 MMcfe/d.
With the Gulfport sale and $977 million in new equity financing, AEU expects to have combined proceeds of around $1.4 billion, providing "$700 million of immediate liquidity after repaying certain existing debt," management said. "Ascent plans to efficiently deploy this capital for ongoing development of its world-class assets."
The $977 million financing consists of $250 million of equity by EMG, First Reserve and McClendon. It also includes $250 million of senior secured debt, $200 million of which is to be used to retire a revolving credit facility, and $477 million of junior secured debt, with $277 million to be used to retire an equal amount of existing convertible notes.
The changes at AEU may not be the last. Last October, management indicated that the Permian Basin unit could go public within a year (see Shale Daily, Oct. 29, 2014). However, that was before the onshore market began to severely contract.