GeoMet Inc., Houston, (Nasdaq: GMET) has executed definitive agreements with a privately-held company to purchase coalbed methane (CBM) assets in Alabama and West Virginia, certain natural gas hedge positions, and a license to use a certain drilling technology.
The effective date of the transaction is July 1, 2011 and is subject to customary closing conditions and purchase price adjustments, including the exercise, waiver or expiration of the preferential purchase rights described below. The company also announced a new amended and restated bank credit agreement which it intends to use to finance the acquisition.
Total consideration for the acquired assets is $90.2 million, subject to adjustment for net proceeds of production after the Effective Date, realized hedging gains subsequent to the Effective Date, any exercise of preferential purchase rights and other customary purchase price adjustments. Closing of this transaction is expected within the next four to eight weeks dependent on the timing of the exercise, waiver or expiration of the preferential purchase rights described below.
A portion of the CBM properties to be acquired in Alabama, subject to two separate preferential rights to purchase by a single party, have an allocated value of $30.8 million. These preferential rights to purchase are expected to expire on or about October 31, 2011, if not earlier exercised or waived. A portion of the CBM properties to be acquired in West Virginia, subject to a preferential right to purchase by a single party, have an allocated value of $23.4 million. The preferential right to purchase is expected to expire on or about December 6, 2011, if not earlier exercised or waived.
In the event that any one or all of these preferential purchase rights are exercised and the other conditions to closing are satisfied or waived, the company is obligated to close on the remainder of the transaction.
The Spyglass Hill Unit comprises approximately 113,000 gross acres and holds all of the leases within the unit to all depths, including those depths and formations below the CBM Mesa Verde coal formation.
The recent rise in natural gas prices may enable the Denver-based company to initiate a plan of development which will include completing coals currently behind pipe, working over existing wells and drilling our permitted locations.