EV Energy Partners LP (NASDAQ: EVEP) has entered into four agreements with certain EnerVest institutional partnerships to acquire oil and natural gas properties, which represent combined estimated net proved reserves of 302 bcfe, in the Appalachian Basin, San Juan Basin, Michigan, and Austin Chalk areas for a combined cash consideration of $259 million.
The acquisitions are expected to close on Oct. 1. EVEP plans to fund the acquisitions with available cash and borrowings under its revolving credit facility.
One of the acquisitions is the purchase of a 100% ownership interest in Belden & Blake Corp., which owns oil and natural gas properties in the Appalachian Basin and Michigan near EVEP's existing properties. Belden's estimated net proved reserves are 120 bcfe. As a result of the transaction, Belden will become a wholly owned indirect subsidiary of EVEP and will remain a C-Corp, subject to state and federal taxation. EVEP's valuation of Belden included an assessment of future taxation at Belden as well as its working capital and other net assets. At recent strip prices, EVEP estimates that corporate taxes at Belden will be negligible for the remainder of 2015 and less than $1 million annually for 2016 and 2017.
The remaining properties to be acquired, which represent combined estimated net proved reserves of 182 bcfe, include additional working interests in certain of EVEP's existing Austin Chalk and Appalachian Basin properties and additional properties located near EVEP's existing San Juan Basin position. The San Juan asset is currently subject to a volumetric production payment (VPP) owned by a third party which expires at the end of 2016. The VPP volumes are approximately 6.0 and 5.1 MMcf/d of production for the remainder of 2015 and 2016, respectively. The acquisitions do not include Utica or Eagle Ford formation rights.
The terms of the transactions were approved by the board of directors and by the board's Conflicts Committee, comprising independent directors. The Conflicts Committee engaged Robert W. Baird & Co. Inc. to act as its financial advisor, and Andrews Kurth LLP to act as its legal counsel.