Houston energy co. sells North Louisiana assets to focus on Eagle Ford
By Olivia Pulsinelli – Senior web editor, Houston Business Journal
Houston-based WildHorse Resource Development Corp. (NYSE: WRD) is selling its North Louisiana assets to an undisclosed third party for about $217 million.
The deal is expected to close on or around March 30, and WildHorse could receive up to $35 million in contingent payments, depending on the number of wells the buyer spuds on the divested property over the next four years.
The assets, which are mainly in the Webster, Claiborne, Lincoln, Jackson and Ouachita parishes of Louisiana, include about 90,000 net acres of leasehold and approximately 473 operated wells, according to WildHorse’s Feb. 12 press release. The properties’ estimated fourth-quarter production was about 46.9 million cubic feet equivalent per day, 96 percent of which was natural gas, and estimated total proved reserves as of Dec. 31 were 412.1 billion cubic feet equivalent, of which 41 percent was proved developed and 98 percent was natural gas.
Once the deal closes, all of WildHorse’s proved reserves will be in East Texas’ Eagle Ford Shale and Austin Chalk formation. In June, WildHorse closed on its nearly $600 million deal to acquire approximately 111... in the Eagle Ford from The Woodlands-based Anadarko Petroleum Corp. (NYSE: APC) and affiliates of Kohlberg Kravis Roberts & Co. LP (NYSE: KKR). The deal made WildHorse the second-largest operator in the Eagle Ford, after Houston-based EOG Resources Inc. (NYSE: EOG), according to WildHorse.
“With the sale of our North Louisiana assets, (WildHorse) will become a pure-play Eagle Ford producer with oil representing approximately 70 percent of our production in 2018,” Jay Graham, chairman and CEO of WildHorse, said in the press release. “While North Louisiana is a tremendous asset, our Eagle Ford position has comparatively more scale and significant runway with over 30 years of inventory at our current annual pace. Furthermore, by monetizing the North Louisiana asset, we can help fund our 2018 capex program and reinforce our already solid balance sheet.”
Proceeds from the North Louisiana deal will be used to pay down debt under WildHorse’s revolving credit facility. As of Dec. 31, WildHorse’s total net debt was $786.2 million, including $500 million of senior unsecured notes, $286.4 million of borrowings under the company’s revolving credit facility and $200,000 in cash, according to a separate update on Feb. 12.
Meanwhile, WildHorse also announced a deal to acquire some Eagle Ford properties in Lee County from a undisclosed seller. That $19.3 million purchase is expected to close on March 1.
WildHorse is acquiring about 17,453 net acres immediately adjacent to the company’s existing Eagle Ford properties, along with one operated and four non-operated producing horizontal wells. The wells’ combined net production is around 59 barrels of oil equivalent per day.
The deal gives WildHorse more than 404,000 net acres in the Eagle Ford.
“In addition, our Lee County acquisition demonstrates our successful strategy of acquiring excellent acreage with the advantage of well results unavailable to the rest of the market,” Graham said in the release. “(Recent results from refracturing the Gold 107 #1 and Fritsche 109 #1 wells) indicate that this position shows great potential for our Gen 3 well design and our development program. We are excited about focusing entirely on our now 404,000 net acre Eagle Ford position where we see enormous opportunity.”
In the North Louisiana divestiture, Guggenheim Securities LLC and Locke Lord LLP represented WildHorse as financial adviser and legal counsel, respectively. WildHorse did not disclose advisers for the Eagle Ford acquisition.
Thanks for this article. Any predictions on North La drilling activity under Tanos compared to what Wildhorse was doing? Interesting that contingent payments were built into the deal.
You're welcome. Tanos has a couple of recent permits for vertical Hosston wells in Bienville Parish. Most of their Louisiana drilling has been in Bienville and Webster and largely Hosston (Travis Peak). The company is currently running a rig in Panola and in Rusk counties, E TX. Those are horizontal wells probably Cotton Valley and Travis Peak targets. It is unclear at this time where the interest lies for Tanos with the Wildhorse acquisition but I think it likely it will include both Hosston and Cotton Valley exploration depending on the parish.