Warren Resources Inc.’s (WRES) strategy to bulk up liquidity continued June 16 with the company saying it will sell noncore Wyoming assets to Escalera Resources Co. (ESCR) for $47 million.
At the end of May, Warren refinanced about $250 million to shore up company finances and pursue acquisitions. When the deal closes, Warren, based in New York City, expects its pro forma available liquidity to increase to $61 million. About $25 million in proceeds will go toward paying debt.
In its deal with Denver’s Escalera, Warren will sell interests in its shallow depth coalbed methane assets in the Atlantic Rim area of the Washakie Basin in Carbon County, Wyo., and related midstream pipeline assets.
Escalera will also take an undivided 30% interest in certain deep rights associated with Warren's former leases in the Atlantic Rim. Warren will retain 70% of the operated deep rights associated with Warren's former leases in the Atlantic Rim area, across 39,000 net acres, which are currently being evaluated for potential upside in a number of the deep formations present.
"Divesting our Wyoming assets fits into Warren's corporate mission to shift our focus toward pursuit of the high-growth, strategic acquisition opportunities for the company,” said Lance Peterson, interim CEO. “Over the past six months we've worked methodically to right-size CAPEX, capture G&A and LOE savings, align ourselves with a strong financial partner, retire debt, and sell non-core assets. Together, all these measures boost the company's liquidity and position us for growth."
The Atlantic Rim area assets are in the Washakie Basin with rights below the Mesa Verde Formation.
Deep formations include:
- Browning;
- Dakota;
- Frontier;
- Niobrara; and
- Shannon.
Escalera's holdings consist primarily operated working interest in the Spyglass Hill Unit. Current production from the assets is about 14 million cubic feet per day (MMcf/d) and proved developed reserves were 83 Bcf as of April 1, 2015.
The acquisition will consolidate Escalera’s major operating and economic interests in the Atlantic Rim and is expected to be immediately accretive to cash flows, said Charles F. Chambers, CEO.
Warren’s operations are focused in California, Wyoming and Pennsylvania. In the Marcellus Shale, the company controls 5,289 net acres in the “core of the core” of the play. Warren is owed $42 million in cash at closing.
The deal has an April 1, 2015, effective date. The sale is subject to closing conditions and adjustments, including completion of the purchaser's financing.
Contact the author, Darren Barbee, at dbarbee@hartenergy.com.
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