Penn Virginia Corp. (PVA) Wednesday said it has entered into a definitive agreement with Magnum Hunter Resources Corp. (MHR) to acquire producing properties and undeveloped leasehold interests in the Eagle Ford Shale play for about $400 million. The transaction is expected to close in May.
Penn Virginia will acquire around 40,600 mineral acres located in Gonzales and Lavaca Counties, Texas, in areas adjacent to its current position in both counties.
The assets include working interests in 46 producing wells, bringing the combined producing Eagle Ford Shale well count to 117 wells.
Estimated net oil and gas production for the acquired assets was about 3,200 barrels of oil equivalent per day or BOEPD during February. This would have brought Penn Virginia's total February production to approximately 19,500 BOEPD and its Eagle Ford Shale production in the month to around 10,900 BOEPD.
The company expects its 2013 production to increase by approximately 3,700 to 4,400 BOEPD for the last seven and one-half months of 2013, with net 2013 capital expenditures estimated to increase by approximately $72 to $82 million.
With this acquisition, the firm now expect to drill up to 62 Eagle Ford Shale wells during 2013, as compared to current guidance of 38 Eagle Ford Shale wells.
The company plans to finance the pending acquisition with a combination of debt and equity, as well as cash on hand. The equity financing can consist of the sale of 10 million shares of common stock to MHR at $4.00 per share. Additionally, a senior unsecured bridge facility has been obtained from the Royal Bank of Canada and Wells Fargo to backstop any financing requirements.
Separately, Penn Virginia said it plans to offer $400 million aggregate principal amount of senior notes due 2020 in a private placement to eligible purchasers. The firm intends to use nearly all of the net proceeds from the offering to finance a portion of the purchase price for the pending Eagle Ford Shale acquisition.
Magnum Hunter said in a separate statement that the effective date of the sale would be January 1. Upon closing, Magnum Hunter plans to use the net proceeds from the deal to reduce debt, including borrowings under its Revolving Credit Facility and for other general corporate purposes.
When the transaction closes, Magnum Hunter will continue to own around 7,000 net mineral acres located in Fayette, Lee, and Atascosa Counties in South Texas.
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