Penn Virginia Corporation Announces Acquisition of Eagle Ford Shale Assets
Strategic to Existing Asset Position in Gonzales and Lavaca Counties,
Texas
Approximately 19,000 Net Acres, Bringing Total Eagle Ford Shale Net
Acreage to Approximately 54,000 Net Acres
Estimated Proved Reserves of 12.0 Million Barrels of Oil Equivalent
(MMBOE)
Production of Approximately 3,200 Barrels of Oil Equivalent Per Day
(BOEPD)
43 Producing Wells and Approximately 345 Potential Drilling Locations
Penn Virginia Corporation (NYSE: PVA) today announced that it has
entered into a definitive agreement with Magnum Hunter Resources
Corporation (NYSE: MHR) to acquire producing properties and undeveloped
leasehold interests in the Eagle Ford Shale play for approximately $400
million. We expect the transaction to close in early to mid-May 2013,
subject to customary post-closing adjustments.
Transaction Highlights
We will acquire approximately 40,600 (19,000 net) mineral acres
located in Gonzales and Lavaca Counties, Texas, in areas adjacent to
our current position in both counties. As a result, we will have
approximately 83,000 gross (54,000 net) contiguous acres in the
volatile oil window of the Eagle Ford Shale, and we will increase our
drilling inventory by 345 (169 net) locations from 295 (251 net)
drilling locations to 640 (420 net) drilling locations.
The assets include working interests in 46 (22.1 net) producing wells,
bringing our combined producing Eagle Ford Shale well count to 117
(82.0 net) wells. Seven wells are in the process of being completed or
awaiting completion and four wells are being drilled on the acreage
being acquired.
Estimated net oil and gas production for the acquired assets was
approximately 3,200 BOEPD during February 2013, which would have
brought our total February 2013 production to approximately 19,500
BOEPD and our Eagle Ford Shale production in February 2013 to
approximately 10,900 ?BOEPD.
Based on a third-party reserve engineering firm′s year-end 2012 review
of the acquired assets, proved reserves as of December 31, 2012 were
approximately 12.0 MMBOE, 96 percent of which were crude oil and
natural gas liquids (NGLs) and 37 ?percent of which were proved
developed. Based on our third-party reserve engineering firm′s
year-end 2012 review, our Eagle Ford Shale proved reserves were 26.2
MMBOE.
Based on our internal estimates as of year-end 2012, probable and
possible reserves for the acquired assets were 3.3 MMBOE and 52.8
MMBOE, respectively. Based on our third-party reserve engineering
firm′s year-end 2012 review, our Eagle Ford Shale probable and
possible reserves were 8.6 MMBOE and 36.5 MMBOE, respectively.
Our 2013 production is expected 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 expected to increase by approximately $72 to
$82 ?million. We estimate that additional net operating cash flows,
prior to interest expense, will be approximately $60 to $70 ?million
during the last seven and one-half months of 2013. As previously
announced, our current full-year 2013 production guidance is
approximately 15,500 to 16,900 BOEPD and capital expenditures guidance
of $360 to $400 ?million.
With this acquisition, we now expect to drill up to 62 (39.3 net)
Eagle Ford Shale wells during 2013, as compared to current guidance of
38 (28.8 net) Eagle Ford Shale wells.
In light of this acquisition and the positive results of additional
wells drilled in Lavaca County, we have decided to retain our full
working interest of about 94 percent in 17 out of 22 drilling units in
Lavaca County which we were previously considering selling.
Transaction Financing
The transaction is not subject to a financing contingency. We intend to
finance the pending acquisition with a combination of debt and equity,
as well as cash on hand. At our option, the equity financing can consist
of the sale to MHR of 10 million shares of our common stock at $4.00 per
share. In addition, we have obtained a senior unsecured bridge facility
from the Royal Bank of Canada and Wells Fargo to backstop any financing
requirements.
RBC Capital Markets is serving as our exclusive financial advisor on the
transaction.
Pro Forma Financial and Operating Data
We have attached pro forma financial and operating data as of and for
the year ended December 31, 2012 to this news release.
Management Comment
H. Baird Whitehead, President and Chief Executive Officer stated, 'This
is a transformational acquisition which will add significantly to our
leasehold and drilling inventory in the Eagle Ford Shale play and is
highly complementary to our existing operating areas where we and MHR
have had very successful drilling results.
'This acquisition will bring our total leasehold position to over 54,000
net acres with up to 640 drilling locations or, at a minimum, an
eight-year inventory based on the expected drilling program across our
expanded footprint. Increasing our rig count to six rigs should allow us
to achieve significant growth in this high-margin play.?
Conference Call to Discuss the Acquisition
A conference call and webcast, during which management will discuss the
acquisition, is scheduled for Wednesday, April ?3, 2013 at 9:00 a.m. ET.
Investors and analysts may participate via phone by dialing toll free
1-877-316-5288 (international: 1-734-385-4977) five to 10 minutes before
the scheduled start of the conference call (use the conference code
30191242), or via webcast by logging on to our website, www.pennvirginia.com,
at least 15 minutes prior to the scheduled start of the call to download
and install any necessary audio software. Presentation slides are
available under 'Presentations & Webcasts? in the 'Investor Relations?
section of our website. A telephonic replay will be available for two
weeks beginning approximately 24 hours after the call. The replay can be
accessed by dialing toll free 1-855-859-2056 (international:
1-404-537-3406) and using the conference code 30191242. In addition, an
on-demand replay of the webcast will also be available for two weeks at
our website beginning approximately 24 hours after the webcast.
Penn Virginia Corporation (NYSE: PVA) is an independent oil and gas
company engaged primarily in the development, exploration and production
of oil and natural gas in various domestic onshore regions including
Texas, Oklahoma, Mississippi and Pennsylvania.For more
information, please visit our website at www.pennvirginia.com.
Certain statements contained herein that are not descriptions of
historical facts are 'forward-looking? statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. The forward-looking
statements include statements about future operations, estimates of
reserve and production volumes and the anticipated timing for closing
the pending transaction. Because such statements include risks,
uncertainties and contingencies, actual results may differ materially
from those expressed or implied by such forward-looking statements.
These risks, uncertainties and contingencies include, but are not
limited to, the following: our ability to successfully complete the
pending acquisition, integrate that business with ours and realize the
anticipated benefits from the acquisition; any unexpected costs or
delays in connection with the acquisition; the volatility of commodity
prices for oil, NGLs and natural gas; our ability to develop, explore
for, acquire and replace oil and natural gas reserves and sustain
production; our ability to generate profits or achieve targeted reserves
in our development and exploratory drilling and well operations; any
impairments, write-downs or write-offs of our reserves or assets; the
projected demand for and supply of oil, NGLs and natural gas; reductions
in the borrowing base under our revolving credit facility; our ability
to contract for drilling rigs, supplies and services at reasonable
costs; our ability to obtain adequate pipeline transportation capacity
for our oil and gas production at reasonable cost and to sell the
production at, or at reasonable discounts to, market prices; the
uncertainties inherent in projecting future rates of production for our
wells and the extent to which actual production differs from estimated
proved oil and natural gas reserves; drilling and operating risks; our
ability to compete effectively against other independent and major oil
and natural gas companies; our ability to successfully monetize select
assets and repay our debt; leasehold terms expiring before production
can be established; environmental liabilities that are not covered by an
effective indemnity or insurance; the timing of receipt of necessary
regulatory permits; the effect of commodity and financial derivative
arrangements; our ability to maintain adequate financial liquidity and
to access adequate levels of capital on reasonable terms; the occurrence
of unusual weather or operating conditions, including force majeure
events; our ability to retain or attract senior management and key
technical employees; counterparty risk related to their ability to meet
their future obligations; changes in governmental regulation or
enforcement practices, especially with respect to environmental, health
and safety matters; uncertainties relating to general domestic and
international economic and political conditions; and other risks set
forth in our filings with the SEC.
Additional information concerning these and other factors can be found
in our press releases and public periodic filings with the SEC. Many of
the factors that will determine our future results are beyond the
ability of management to control or predict. Readers should not place
undue reliance on forward-looking statements, which reflect management′s
views only as of the date hereof. We undertake no obligation to revise
or update any forward-looking statements, or to make any other
forward-looking statements, whether as a result of new information,
future events or otherwise.
Summary Pro Forma Financial Data
The summary pro forma financial data presented as of and for the year
ended December 31, 2012 are derived from our unaudited pro forma
condensed consolidated financial statements. The pro forma statement of
operations data for the year ended December 31, 2012 assumes the
transactions listed below occurred on January 1, 2012. The pro forma
balance sheet data as of December 31, 2012 assumes the transactions
listed below occurred as of December 31, 2012.
The pro forma financial data give effect to the pending acquisition and
to the financing thereof with a combination of debt and the issuance to
MHR of $40 million of our common stock. The unaudited pro forma
financial data are based on certain assumptions and do not purport to be
indicative of the results which would actually have been achieved if the
pending acquisition and other transactions listed above had been
consummated on the dates indicated, or of results that may be achieved
in the future.
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| Year Ended December 31, 2012 | |||||||||
| Pro Forma | ? | Historical | |||||||
| Statement of operations data: | (in thousands) | ||||||||
| Revenues | |||||||||
Crude oil | $ | 299,803 | (1) | $ | 229,572 | ||||
NGLs | 32,377 | (1) | 31,051 | ||||||
Natural gas | 50,415 | (1) | 49,861 | ||||||
Gain on sale of property and equipment, net | 4,282 | 4,282 | |||||||
Other | ? | 2,383 | ? | ? | 2,383 | ? | |||
Total revenues | 389,260 | 317,149 | |||||||
| Operating expenses | |||||||||
Lease operating | 37,289 | (1) | 31,266 | ||||||
Gathering, processing and transportation | 14,547 | (1) | 14,196 | ||||||
Production and ad valorem taxes | 14,542 | (1) | 10,634 | ||||||
General and administrative | 45,900 | 45,900 | |||||||
Exploration | 95,103 | 34,092 | |||||||
Depreciation, depletion and amortization | 232,263 | 206,336 | |||||||
Impairments | 104,484 | 104,484 | |||||||
Loss on firm transportation commitment | ? | 17,332 | ? | ? | 17,332 | ? | |||
Total operating expenses | ? | 561,460 | ? | ? | 464,240 | ? | |||
| Operating loss | (172,200 | ) | (147,091 | ) | |||||
Other income (expense) | |||||||||
Interest expense | (94,917 | ) | (2) | (59,339 | ) | ||||
Loss on extinguishment of debt | (3,164 | ) | (3,164 | ) | |||||
Derivatives | 36,187 | 36,187 | |||||||
Other | ? | 116 | ? | ? | 116 | ? | |||
Loss before income taxes | (233,978 | ) | (173,291 | ) | |||||
Income tax benefit | ? | 92,734 | ? | ? | 68,702 | ? | |||
| Net loss from continuing operations | (141,244 | ) | (104,589 | ) | |||||
Preferred stock dividend | ? | (1,687 | ) | ? | (1,687 | ) | |||
| Loss attributable to common shareholders | $ | (142,931 | ) | $ | (106,276 | ) | |||
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| Year Ended December 31, 2012 | ||||||
| Pro Forma | ? | Historical | ||||
| Balance sheet data (at period end): | (in thousands) | |||||
| Assets: | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 17,650 | $ | 17,650 | ||
Accounts receivable, net of allowance for doubtful accounts | 62,978 | 62,978 | ||||
Derivative assets | 11,292 | 11,292 | ||||
Other current assets | ? | 4,595 | ? | 4,595 | ||
Total current assets | 96,515 | 96,515 | ||||
Property and equipment, net (successful efforts method) | 2,167,734 | 1,723,359 | ||||
Derivative assets | 5,181 | 5,181 | ||||
Other assets | ? | 31,309 | ? | 17,934 | ||
Total assets | $ | 2,300,739 | $ | 1,842,989 | ||
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| Liabilities and shareholders′ equity: | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 111,655 | $ | 111,655 | ||
Deferred income taxes | ? | 370 | ? | 370 | ||
Total current liabilities | 112,025 | 112,025 | ||||
Other liabilities | 30,401 | 28,901 | ||||
Derivative liabilities | 1,421 | 1,421 | ||||
Deferred income taxes | 210,173 | 210,767 | ||||
Long-term debt | 1,012,759 | 594,759 | ||||
Total shareholders′ equity | ? | 933,960 | ? | 895,116 | ||
Total liabilities and shareholders′ equity | $ | 2,300,739 | $ | 1,842,989 | ||
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Summary Pro Forma Reserve, Production and Operating Data
The following table presents our historical and pro forma oil and
natural gas reserves and present values as of the dates indicated. Our
historical reserve information was derived from reserve reports prepared
by our third-party reserve engineering firm. Guidelines established by
the Securities and Exchange Commission (SEC) regarding the present value
of future net cash flows were utilized to prepare these estimates.
Estimates of reserves and their value are inherently imprecise and are
subject to constant revision and change, and they should not be
construed as representing the actual quantities of future production or
cash flows to be realized from oil and natural gas properties or the
fair market value of such properties.
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| Year Ended December 31, 2012 | ||||||
| Pro Forma | ? | Historical | ||||
| Statement of operations data: | (dollars in thousands) | |||||
| Proved reserves(3): | ||||||
Crude oil (MMBbl) | 35.7 | 24.9 | ||||
NGLs (MMBbl) | 21.4 | 20.7 | ||||
Natural gas (Bcf) | 410.5 | 407.5 | ||||
| 125.5 | 113.5 | ||||
% oil and NGLs | 45 | 40 | ||||
% proved developed | 41 | 41 | ||||
| 18.9 | 20.1 | ||||
PV-10(5) | $ | 933,209 | $ | 692,472 | ||
Standardized measure of discounted future net cash flows | $ | 670,959 | $ | 497,874 | ||
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(3) Estimated proved reserves data is presented as of December 31, 2012 using unweighted average first-day-of-the month prices for the year ended December 31, 2012. For historical reserves, the average prices for oil, NGLs and natural gas were $102.24 per barrel, $39.48 per barrel and $2.47 per MMBtu, respectively. For the acquired reserves, the average prices oil, NGLs and natural gas were $98.77 per barrel, $43.57 per barrel and $2.88 per MMBtu, respectively. |
(4) Reserves to production ratio is determined by dividing our proved reserves by the average daily production attributable to such reserves for the quarter ended December 31, 2012, on an annualized basis. |
(5) PV-10 is the present value of estimated future revenues to be generated from the production of proved reserves, before income taxes, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation, without giving effect to financial hedging activities, non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion and amortization, and discounted using an annual discount rate of 10%. Standardized measure is the present value of estimated future cash inflows from proved natural gas and oil reserves, less future development and production costs and future income tax expenses, discounted at 10% per annum to reflect timing of future cash flows and using the same pricing assumptions as are used to calculate PV-10. Standardized measure differs from PV-10 because standardized measure includes the effect of future income taxes. For purposes of computing our pro forma standardized measure, after giving effect to the pending acquisition, we have assumed that the tax rates applicable to the properties pending to be acquired would be the same as our historical tax rates. |
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PV-10 is considered a non-GAAP measure. We believe the presentation of the PV-10 value is relevant and useful to our investors because it presents the discounted future net cash flows attributable to our proved reserves before taking into account corporate income taxes. We believe investors and creditors utilize our PV-10 value as a basis for comparison of the relative size and value of our reserves to other companies. Neither PV-10 value nor standardized measure reflects the impact of financial hedging transactions. The following reconciles our PV-10 value to our standardized measure: |
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? | As of December 31, 2012 | |||||||
| Pro Forma | ? | Historical | ||||||
| Statement of operations data: | (in thousands) | |||||||
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PV-10 value | $ | 933,209 | $ | 692,472 | ||||
Income tax effect | ? | (262,250 | ) | ? | (194,598 | ) | ||
Standardized measure | $ | 670,959 | $ | 497,874 | ||||
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The following table sets forth our historical and pro forma production
and average sales prices with respect to our oil and gas properties for
the year ended December 31, 2012, as if the pending acquisition had
occurred on January 1, 2012.
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| Year Ended December 31, 2012 | ||||||
| Pro Forma | ? | Historical | ||||
| Total production: | ||||||
Crude oil (MBbl) | 2,938 | 2,252 | ||||
NGLs (MBbl) | 928 | 884 | ||||
Natural gas (MMcf) | ? | 20,428 | ? | 20,261 | ||
Total production (MBOE) | ? | 7,271 | ? | 6,513 | ||
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| Average prices: | ||||||
Crude oil ($/Bbl) | $ | 102.04 | $ | 101.95 | ||
NGLs ($/Bbl) | 34.89 | 35.13 | ||||
Natural gas ($/Mcf) | ? | 2.47 | ? | 2.46 | ||
Total ($/BOE) | $ | 52.62 | $ | 47.67 | ||
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Penn Virginia Corporation
James W. Dean
Vice President,
Corporate Development
610-687-7531
Fax: 610-687-3688
invest@pennvirginia.com
