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Oklahoma City-based Mach Natural Resources LP is acquiring oil and gas assets in Oklahoma for a total cash consideration of $815 million from Paloma Partners IV, LLC, a privately held Delaware limited liability company backed by EnCap Investments and its affiliated companies.
Mach Natural signed an agreement to acquire certain interests in oil and gas properties, rights and related assets located in certain counties in Oklahoma, subject to customary terms, conditions, and closing price adjustments, the company said in a news release Monday. The acquisition is expected to close on December 29 with an effective date of September 1.
The acquisition will add approximately 62,000 net acres in the Anadarko Basin in Canadian, Grady, McClain, Caddo, Custer, Dewey, Blaine and Kingfisher Counties of Oklahoma to Mach Natural’s portfolio. Around 76 percent of the assets are located in the core development area in Canadian and Grady Counties, according to the release.
The assets were measured to have production of approximately 32,000 barrels of oil equivalent per day, consisting of 23 percent oil and 57 percent liquids, as of August. The estimates include PDP reserves of approximately 75 million barrels of oil equivalent, Mach said.
The company noted that there is one rig currently running in Grady County and six additional wells expected to be completed between effective date and closing date. The assets also feature high-return drilling locations with over 12 years of operated inventory on a one-rig program.
The acquisition is accretive to both total cash available for distribution and expected cash distribution per unit, Mach said. It also fits with the company’s strategy of “acquiring PDP reserves and expansive SCOOP/STACK inventory at a discount to PDP PV103”, the company said, adding that it plans to add one rig to the assets in addition to its current two-rig program while remaining under its target of a 50 percent reinvestment rate.
Mach said it plans to fund the purchase price with new debt financing. Mach has received fully committed financing from a group led by Chambers Energy Management and EOC Partners, and including Mercuria Investments US, Inc., funds managed by Farallon Capital Management LLC, Macquarie Group, among other financial institutions as participants. Its $825mm senior secured term loan will close at the same time as the completion of the acquisition, the company added.
Pricing of IPO
In October, Mach priced its initial public offering of 10,000,000 common units representing limited partner interests in the company at $19.00 per common unit. Mach has granted underwriters an option to purchase up to an additional 1,500,000 common units at the initial public offering price. Mach’s common units are expected to begin trading on the New York Stock Exchange under the ticker symbol MNR, according to an earlier news release.
Mach expects to receive net proceeds of approximately $171.7 million, after deducting underwriting discounts and commissions and estimated offering expenses and excluding any exercise of the underwriters’ option to purchase additional common units. Mach said it intends to use the net proceeds “to repay in full and terminate certain existing credit facilities of its subsidiaries, with the remainder to repay indebtedness and purchase common units from the existing common unit owners, with any remainder for general partnership purposes”.
Upon the closing of the offering, the public will own an approximate 10.5 percent limited partner interest in Mach, or an approximate 12.1 percent limited partner interest if the underwriters exercise the overallotment option in full.
Mach is an independent upstream oil and gas company focused on the acquisition, development and production of oil, natural gas and natural gas liquid (NGL) reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas.
To contact the author, email rocky.teodoro@rigzone.com
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