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$690 Million Deal Moves Ahead: Crescent Energy to Complete Purchase of EP Energy's Uinta Assets04/06/2022
On March 30, Crescent Energy closed the acquisition of Uinta Basin assets in Utah that were previously owned by EP Energy for $690 million, a few hundred million dollars below the original price. While a total cash consideration of about $815 million was announced at the time of the transaction's announcement back in February.
At least according to Crescent CEO David Rockecharlie, the accretive deal increases Crescent's Rockies position and adds significant cash flow and a portfolio of high-quality oil-weighted undeveloped sites.
Crescent's acquisition of Uinta indicates its competitive strength and ability to simultaneously deliver shareholder value through accretive acquisitions and to create long-term value for its shareholders through the consolidation of its businesses in today's market.
Upon closing of the Uinta transaction, Crescent's lenders increased the borrowing base under the revolving credit facility to $1.8 billion and the committed amount to $1.3 billion, an increase of $600 million from its previous level.
EP Energy had owned these assets earlier, according to a news release from Crescent Energy on Feb. 16 that was dedicated to the Uinta acquisition. The Uinta comprises about 145,000 contiguous net acres, most of it producing oil (roughly 65%), about 30,000 boe/d.
A year after EP Energy emerged from a bankruptcy process that handed control to its creditors, EnCap Investments agreed to take over EP Energy's assets in the Eagle Ford and Uinta basins for $1.55 billion.
Although U.S. antitrust regulators threatened to hinder EnCap's acquisition of EP Energy, citing the private equity firm's dominant position in the Uinta shale formation as a concern.
According to Reuters, the U.S. government agencies finally approved EnCap's $1.5 billion purchase of EP Energy on the condition that EP Energy's entire Utah oil business be sold. If the assets from Utah hadn't been sold, there would have been just three producers that sell Uinta Basin crude oil to refineries in Salt Lake City, and consumers would have paid more in prices.
Crescent Energy was formed in December when Contango Oil & Gas and KKR went for an all-stock merge. KKR remains the company's partner, but Contango serves as its subsidiary as it manages a portfolio of assets in the Lower 48.
Having completed the Uinta acquisition, Crescent Energy expects to operate two rigs off Uinta for the remainder of the year. In addition to its acquired Uinta assets, Crescent's pro forma year-end 2021 provided reserves totaled 598 million boe, of which 83% was developed, 55% was liquid, and its provided PV-10 was $6.2 billion. Based on the production type curves used in Crescent's third-party reserve reports, a 22% decline rate for its proved developed producing reserves is expected for the first year.
Moreover, on March 30, the company reiterated its previously announced capital investment strategy and production and cost guidance for 2022. Investments in the Eagle Ford and Uinta basins will account for 80%-85% of the $600 million-$700 million capital program for 2022.
Concerning the Uinta acquisition, the Company added additional oil hedges as part of its risk management practices. Together with the expected Uinta volumes, Crescent now has derivative agreements in place covering approximately 60% of its expected total production in 2022.
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