Houston-based Isramco Inc. has agreed to acquire varying working interests in producing oil and natural gas properties in Texas, New Mexico and Oklahoma from GFB Acquisition I, LP and GE Financial Services for approximately $102 million. The agreement, which was executed on Feb. 15, is expected to close in March. The transaction includes mainly operated oil and gas properties in approximately 40 fields in East Texas, the Texas Gulf Coast, Permian, Anadarko and San Juan basins. Isramco noted that significant fields in the transaction are the Alabama Ferry Field in East Texas, the Bagley Field in West Texas and New Mexico, and the Esperson Dome Field on the Texas Gulf Coast. Net production from the properties is approximately 600 b/d of oil and 3.5 MMcf/d of gas. Based on a reserve report prepared by a third party consulting firm as of Jan. 1, total net proved developed producing reserves are approximately 2.7 million bbl of oil and 14 Bcf of gas. Isramco, which was founded in 1982 and owns varying working interests in oil and gas wells in Louisiana, Texas, Oklahoma and Wyoming, said it anticipates funding up to 5% of the purchase price from working capital and that it will obtain third-party loans for the rest. In connection with the purchases the company and the Bank of Nova Scotia entered into a commitment letter in which the bank agreed to provide or arrange a secured revolving credit facility. Under the credit facility it is anticipated that the company will be able to initially borrow up to $54 million. GFB Acquisition I, LP is a Midland, TX-based operator of oil and gas properties, formed in a partnership with GE Financial Services to acquire and exploit properties located in onshore oil and natural gas basins in North America.
Aspen Pipeline LP affiliate Odessa Fuels Marketing LLC has signed a definitive agreement with Tulsa-based Arena Resources Inc. to purchase natural gas from Arena’s Fuhrman Mascho properties in the Yates formation in Andrews County, TX. Aspen has also signed a definitive agreement with PSEG Texas LP subsidiary Odessa-Ector Power Partners LP to deliver Yates formation gas in a dedicated pipeline to the PSEG Texas 1,000 MW energy generation facility just outside Odessa, TX. The gas from the Yates formation at an approximate depth of 3,000 feet has a high nitrogen content and is often considered too costly to produce because of the need to remove the nitrogen before transporting. The PSEG Texas power plant can consume a gas blend containing Yates formation gas without removing the excess nitrogen. Terms of the deals were not disclosed. Aspen said it plans to construct a 20-inch diameter pipeline with an initial length of 65 miles to gather Yates formation gas, inclusive of recompletions and new drilling opportunities from Ector and Andrews counties in Phase I and later from Gaines County in Phase II. The agreements call for primary terms of 15 years for both Arena and Odessa-Ector Power Partners. “Given the shallow depth and relative easy access to this formation for the producer, an advantageous market fuel source in addition to a new pipeline gathering installation in the region, this project is a win-win for all parties involved,” said Russ Bourquein, senior vice president of Aspen Pipeline LP. “Aspen is pursuing expanding its footprint in the region through current negotiations with incremental en- user markets. In addition, Aspen has co-development partners looking to participate in contracting and drilling Yates formation acreage along the proposed pipeline route with Aspen.” Bourquein told NGI that the natural gas purchases will begin with the start-up of the pipe, which is expected to be ready for commercial service during 1Q2009. Arena’s Fuhrman Mascho properties comprise in excess of 22,000 acres with drilling rights to the Yates formation on approximately 18,000-plus acres. Arena has agreed to dedicate the gas reserves to the project for the life of the reserves. It estimates there are 450 potential drilling locations, including approximately 100 idle or temporarily abandoned well bores. Aspen noted that these wells that were drilled to a deeper, oil-bearing formation can be excellent candidates to be recompleted at the shallower Yates formation. The agreement with Arena requires that they drill or recomplete 60-90 wells per year for the first four years and strive on a best efforts basis to attain a volumetric goal of 30 MMcf/d or more.
Mergers and acquisitions (M&A) within the energy sector are likely to increase this year, but companies may be challenged in securing ready capital, according to a recent survey. CFO Research Services collaborated with CIT Group Inc. to survey a range of industry executives across North America for their forecasts for M&A this year. The study, “M&A in Challenging Times,” was fielded in November 2007, with surveys of 529 senior-level finance decision-makers at middle market U.S. and Canadian companies. The study includes 32 energy executives. Nearly half, or 48%, of the North American energy executives surveyed consider M&A to be a “major part of their current business strategy,” according to the report. Forty-two percent said M&A “contributed” to their business strategy; 10% said it was only minor. And of those surveyed, 69% expect M&A activity to increase within the energy sector this year. When asked if the recent changes in capital markets will affect completing M&A transactions, it was a 50/50 split among the energy executives, the report said. Difficulty raising capital (47%) and lack of transparency in the private company’s price, terms and other factors (38%) “posed the greatest challenges for middle market companies seeking to acquire other businesses, compared with what larger companies experience.” To read the results for the entire survey, go to https://middlemarket.cit.com.
Regency Energy Partners LP will build its North Louisiana and East Texas asset base through the acquisition of Nexus Gas Holdings LLC for $85 million, the Dallas-based company said. Nexus is a midstream provider of gas gathering, dehydration and compression services for producers in DeSoto Parish, LA, and Shelby County, TX. The Nexus gathering system consists of 80 miles of low- and high-pressure pipelines and is currently gathering more than 110 MMcf/d from approximately 500 wells. The acquisition will be immediately accretive to Regency unitholders, Regency said. The acquisition is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other conditions. Closing is expected to occur in late first quarter or early second quarter 2008. The purchase price of $85 million is subject to adjustments and will be funded using borrowings under Regency’s revolving credit facility. With the deal Regency will also acquire Nexus’ agreement to purchase 136 miles of pipeline from Southern Natural Gas Co. (SNG). Before Regency can purchase the pipeline from SNG, FERC must approve the abandonment and certain closing conditions must be met. If the transaction closes under the currently anticipated conditions, Regency will purchase the pipeline from SNG and make an additional payment to Nexus. Regency’s general partner is majority-owned by affiliates of GE Energy Financial Services, a unit of GE (see NGI, June 25, 2007).
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