Antero Acquires 55,000 Marcellus Acres From Southwestern
On June 9, 2016, Antero Resources Corporation signed an agreement with Southwestern Energy to acquire approximately 55,000 net acres in the Marcellus shale. This acquisition also includes undeveloped properties located primarily in Wetzel, Tyler and Doddridge Counties in West Virginia with approximately 14 MMcfe/d of net production.
Hunt Oil And TSSP To Jointly Develop Midland Basin Acreage
On June 13, 2016, TSSP, a leading special situations investment platform of TPG, and Hunt Oil Company, a privately held E&P company, announced an agreement to jointly develop Hunt Oil’s assets in the Midland Basin. The development area covers 18,000 net acres across Martin, Glasscock, Midland and Upton counties in Texas.
Natural Resource Partners to Sell Williston Assets For $116 Million
Irving-based private equity firm manager Natural Resource Partners L.P. (NRP) announced on June 14, 2016 that its subsidiary NRP Oil and Gas LLC has signed a definitive agreement with Lime Rock Resources IV-A, L.P., an affiliate of private equity firm Lime Rock Partners, to sell all of its Williston Basin non-operated oil and gas working interest assets for $116.1 million.
EnerVest Acquisition of Eagle Ford Assets For $1.3 Billion
On May 17, 2016, EnerVest, Ltd. (EnerVest), a Houston-based E&P company, and its institutional partners announced new acquisitions in the Eagle Ford shale. Since September 2015, EnerVest has acquired $1.3 billion of assets in three transactions in a concentrated part of Karnes County in Texas. Most recently, EnerVest acquired 11,254 net acres, active drilling programs and 597 drilling locations from BlackBrush Oil & Gas LP and GulfTex Energy. Combined, the recently acquired Eagle Ford assets are producing 13,747 boe/d.
Parsley Energy Acquisition in Pecos and Reeves Texas For $280 Million
Parsley Energy, Inc. (Parsley) announced on May 23, 2016 that it has reached an agreement to acquire mineral rights under approximately 30,000 acres in Pecos and Reeves Counties, Texas in the Southern Delaware Basin for $280.5 million in cash. Most of the acquired mineral acreage represents Parsley leasehold, with the balance leased and operated by other operators. Parsley also acquired surface rights on approximately 80% of the mineral acreage, facilitating optimal wells and facility placements. Parsley intends to finance this acquisition through debt and equity issuances.
Mexico & Canada
Gear Energy Acquires Striker’s Share
On June 7, 2016, Gear Energy Ltd. (Gear) definitively agreed to acquire the entire share capital of Striker Exploration Corp. (Striker), a Calgary-based E&P company, in a stock swap transaction valued at CAD $54 million (USD $42.664 million). Gear offered 2.325 common shares per Striker's share. Based on Gear’s closing stock price of CAD $0.73 (USD $0.569) on June 6, 2016, the last full trading day prior to the announcement, each Striker share was valued at CAD $1.697 (USD $1.323).
Teine Energy Agreed To Acquire Penn West Petroleum Assets
On June 10, 2016, Teine Energy Ltd. definitively agreed to acquire Saskatchewan assets located in west-central Canada from Penn West Petroleum Ltd., a Calgary-based producer of crude petroleum and natural gas, for approximately CAD $975 million (USD $766.2 million).
Preferential Rights to Purchase
Preferential rights to purchase (PRP) are the rights reserved to a party to an operating agreement or other agreement to buy all or part of a working interest that another party proposes to sell. Pref rights give the holder the option to purchase an asset on the same terms and conditions as offered in good faith by a third party. They are also called preemptive rights, rights of first refusal (ROFRs) or contingent rights. They are not options as a PRP holder cannot compel the sale. Once the PRP is triggered, then it becomes an option to purchase.
To qualify as a triggering event for a PRP, the offer from a third party must be “bona fide,” i.e., made in good faith, at arms-length, and the buyer must be ready, willing and able to follow through. The sale should not be a gift, a transfer as a mortgaged security, an involuntary transfer or a sale to a subsidiary (reading from AAPL 1989 Model Form 610’s language). To exercise a PRP, the holder must match the existing offer’s terms and conditions precisely unless the terms are not commercially reasonable, not imposed in good faith or specifically designed to defeat the PRP.
Buyers should be aware that they need to give proper notices to a PRP holder and the best rule of thumb could be to send PRP holders a copy of the PSA.
Sellers should draft the PRP clause to clearly state the types of transfers that do not trigger the PRP, how the burdened property will be valued and the deadline to exercise the PRP.
An interesting case for PRPs involves Apache, BP and Marbob Energy’s battle for Permian Basin assets. See Marbob Energy Corp. v. BP Am. Inc., CV 2010-647 (N.M. Dist. Ct. Oct. 18, 2010). BP exercised its PRP before Marbob sent the PRP notice. While not customary, this was a ‘‘blind exercise,’’ which was so named because the PRP holder did not know the terms and conditions of the sale to which it is agreeing. The court held that this type of exercise was valid. Notice is required to protect the PRP holder, not the seller. Formal written notice ensures that the PRP holder is aware that its PRP has been triggered, so that the holder may analyze whether to exercise its right. If a PRP holder chooses to exercise its right before receiving notice from the seller, it is the PRP holder, rather than the seller who may be prejudiced because the holder becomes legally obligated to purchase the asset without knowing the material terms of the sale.