Lucas Energy acquires Hunton properties

Lucas Energy Inc. (NYSE MKT: LEI) has signed a purchase agreement to acquire, from 21 different entities and individuals, working interests in producing properties and undeveloped acreage. The assets being acquired include varied interests in two largely contiguous acreage blocks in the US Mid-Continent region. 

The properties currently produce in excess of 1,200 net barrels of oil equivalent per day (boe/d), of which 53% are liquids from 114 producing wells. The bulk of the production is from the Hunton formation holding approximately 43,000 gross acres (9,900 net acres) in central Oklahoma. Further, offset development drilling opportunities for at least 40 additional wells have already been identified. According to a recent third-party reserve report (as of Dec. 1, 2015), total proved developed reserves (PDP) are 5.4 million barrels of oil equivalent (MMboe) comprising 6% oil, 47% natural gas liquids (NGL), and 47% natural gas.

In exchange for the assets being acquired, Lucas will assume $31,350,000 in commercial bank debt, issue 552,000 shares of a newly designated form of convertible preferred stock, issue 13,009,664 shares of common stock, and pay $4,975,000 in cash.

At the closing of the transaction, Lucas will rebrand and change its name to Camber Energy Inc. 

Anthony C. Schnur will maintain his role as president and CEO of the company. However, the sellers will have the right to appoint three members to the board of directors at closing, including Richard N. Azar II. Azar, the principal seller and manager of the properties, will be appointed as executive chairman following the closing. Azar is a founding partner of Segundo Resources, representative of the sellers, and for over 20 years has helped develop the Hunton resource play in Central Oklahoma through his direction of Segundo, ownership in Altex Resources Inc., and various other oil and gas ventures. 

Prior to entering into the acquisition agreement, Lucas completed the transfer of its existing oil and gas assets and current and outstanding senior debt obligations through a conveyance to a wholly owned special purpose vehicle (SPV), non-recourse to Lucas Energy. Lucas's senior lender will maintain its rights to the assets of the SPV.  

The closing of the acquisition is subject to closing conditions including Lucas placing the commercial bank facility to fund the $4.975 million cash required to acquire the properties; Lucas obtaining stockholder approval for the issuance of the shares of common stock in the closing and upon conversion of the preferred stock; the effectiveness of a registration statement registering the common stock and common stock issuable upon conversion of the preferred stock issued at closing; Lucas's continued listing on the NYSE MKT prior to and following the closing; and the consent of various creditors of the sellers. The parties are targeting a closing date, subject to the satisfaction or waiver of the required closing conditions, of Lucas's first fiscal quarter of 2016.

Post-closing there will be 14,514,902 shares of common stock issued and outstanding; assuming there are no adjustments through the diligence and closing process. Additionally, the new class of preferred stock to be issued at closing will be convertible into 3,941,280 shares of common stock and will bear a 6.0% annual dividend rate payable in cash, common stock or PIK at Lucas's option. The preferred, which has a face value and liquidation preference of $25 per share, a conversion rate into common stock of 7.14:1, will be convertible at any time at a price of $3.50 per share. Under certain conditions, it will convert automatically.

ROTH Capital Partners acted as financial advisor on the transaction.

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


The Time is Right for Optimum Reliability: Capital-Intensive Industries and Asset Performance Management

Imagine a plant that is no longer at risk of a random shutdown. Imagine not worrying about losing...

Going Digital: The New Normal in Oil & Gas

In this whitepaper you will learn how Keystone Engineering, ONGC, and Saipem are using software t...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...

Leveraging the Power of Information in the Energy Industry

Information Governance is about more than compliance. It’s about using your information to drive ...