This week’s buyers: Carrizo Oil & Gas

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Carrizo Oil & Gas Announces Eagle Ford Shale Acquisition

On 27th October, Carrizo Oil & Gas, Inc. (Nasdaq:CRZO) completed the acquisition of additional leasehold and producing interests in the Eagle Ford Shale from Eagle Ford Minerals, LLC (“EFM”), for $250 million in cash, subject to a closing adjustment credit of $7 million.

Eagle Ford Shale Acquisition Highlights

  • 6,820 net acres located primarily in LaSalle, Atascosa, and McMullen Counties, TX; the acreage is 100% operated by Carrizo,
  • Net production of approximately 2,670 Boe/d (85% oil) in the third quarter of 2014 from 81 gross (20.1 net) wells,
  • Net proved reserves, based on Carrizo’s internal estimates, of 16.7 MMBoe (82% oil, 34% developed),
  • Adds approximately 93 net undeveloped Eagle Ford Shale drilling locations based on Carrizo’s current development plan

The acquisition represents an approximate 25% working interest in certain Eagle Ford Shale properties that were already operated by Carrizo. Following the closing of the transaction, Carrizo holds an approximate 100% working interest in these assets. The acquired properties are in three main project areas (RPG, Irvin Ranch, and Pena) which are centrally located in the most prospective portion of the Eagle Ford Shale’s volatile oil window and represent some of the highest EUR’s and IRR’s of all of Carrizo’s Eagle Ford Shale portfolio. Third quarter net production from the acquired properties was 2,260 Bbls/d and 2,457 Mcfe/d.

The acquisition increases Carrizo’s position in the Eagle Ford Shale by approximately 6,820 net acres to more than 81,000 net acres, and increases its drilling inventory in the play by 93 net wells to more than 915 net locations. As of September 30, 2014, Carrizo estimates net proved reserves associated with the acquisition to be 16.7 MMBoe (82% oil). Additionally, the Company estimates the net 2P potential of the acquisition to be approximately 39.0 MMBoe (80% oil).

The transaction was completed on October 24, 2014, with an effective date of October 1, 2014. At closing, Carrizo paid approximately $93 million, with the remaining $150 million to be paid by February 2015. Carrizo plans to fund the acquisition with the proceeds of a separately-announced debt financing. The closing payment for the transaction was initially funded from borrowings under Carrizo’s revolving credit facility.

In conjunction with the acquisition, Carrizo’s banking syndicate, led by Wells Fargo as administrative agent, has increased the Company’s borrowing base to $800 million from $675 million. However, Carrizo has voluntarily elected to limit the lenders’ aggregate commitment to $685 million, up from $585 million previously. The lenders’ aggregate commitment can be increased at any time to the full $800 million by requesting one or more lenders approve an increase to their commitment.

S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented, “While Carrizo has not historically been active in the acquisition of producing properties, we felt this was a perfect deal for the Company. The acquisition adds an incremental 25% working interest in three of our four highest-return areas within the Eagle Ford Shale, and adds a significant amount of undrilled potential in addition to the existing production. We believe the purchase price is very attractive based on the market value of producing and non-producing assets in the area, and expect the acquisition to be immediately accretive on a variety of financial metrics, including cash flow and earnings per share.”

 

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