Memorial Production Partners LP (Nasdaq: MEMP) has acquired certain oil and gas producing properties in the Eagle Ford trend from Alta Mesa Holdings LP for a purchase price of $173 million.
The acquired properties are located in Karnes County in the core of the Eagle Ford oil window and consist of 15,200 gross (800 net) acres that are currently producing 1,650 Boe/d (80% oil, 10% NGLs, and 10% natural gas) net to MEMP. The properties are 100% non-operated and include interests in 117 producing wells. In addition, MEMP is acquiring a 30% interest in the seller's Eagle Ford leasehold, which includes an interest in over 180 gross and 9 net PDNP and PUD locations. Murphy Oil Corp. is the primary operator of the acquired properties.
Under the transaction structure, MEMP will acquire all of the seller's working and net revenue interest in the producing wells subject to a net profits interest (NPI) retained by the seller that reduces annually and terminates after three years. At the end of three years, MEMP will own all of the seller's interests in the currently producing wells. The seller retained NPI results in a working and net revenue interest that escalates annually to MEMP. This structure is designed to offset natural production declines, minimize maintenance capital requirements, and maintain more stable cash flow throughout the life of the assets.
MEMP's effective working and net revenue interest in the 117 producing wells will increase, as the NPI reduces, to 50% of seller's interest from Jan.1 through Dec. 31; 70% of seller's interest from Jan. 1, 2015, through Dec. 31, 2015; 85% of seller's interest from Jan.1, 2016, through Dec. 31, 2016; and 100% of seller's interest from Jan. 1, 2017, and thereafter.
MEMP's initial average working and net revenue interest on Jan. 1, in the 117 producing wells is 6.4% and 5.2%, respectively. Beginning Jan. 1, 2017, MEMP's average working and net revenue interest in the 117 producing wells will be 12.8% and 10.3%, respectively. MEMP's average working and net revenue interest on the PDNP and PUD locations is 4.9% and 4.0%, respectively.