(Reuters) - Atlas Resource Partners (ARP.N) said it will buy gas-rich assets from Carrizo Oil & Gas (CRZO.O) for $190 million, and raised its distribution forecast.
The assets, located in the Barnett Shale in Texas, have proved reserves of about 277 billion cubic feet equivalent (cfe), and the company will pay about 69 cents per million cfe, Atlas said in a statement.
The deal, which is expected to close in late April, is seen to immediately add to Atlas' adjusted EBITDA and distributable cash flow.
Carrizo expects to use proceeds from the deal to repay debt, the Houston-based company said in a statement.
Atlas now expects its distribution for the second half of 2012 to be in a range of 85 cents to 90 cents per limited partner unit, up from its previous outlook of 80 cents per unit.
It also forecast a 45 percent increase in its 2013 distribution to between $2.25 and $2.40 per unit.
CRZO selling assets to ARP
CRZO selling assets to ARP
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: CRZO selling assets to ARP
..BMO Capital increased its target on Carrizo to $40/share after the company sold some of its Barnett shale assets. The firm thinks that the sale closes the company's cash flow deficit this year while increasing investors' attention on the positive attributes of the company's Eagle Ford Shale asset. The firm maintains an Outperform rating on Carrizo.
First Call's 12-month target price is now $36.39 (this is an average of all the analysts that have submitted forecasts to First Call).
I will take a hard look at my Net Income and Cash Flow Forecast model for CRZO and post an update under the Sweet 16 Tab by noon today. My current Fair Value estimate will be shown at the bottom of the forecast. I do think the asset sale is a good move. It firms up the Balance Sheet and helps them focus on increasing their liquids production from the Eagle Ford.
CRZO is going to report a big jump in liquids production for Q1 that should draw a lot of attention to this stock.
First Call's 12-month target price is now $36.39 (this is an average of all the analysts that have submitted forecasts to First Call).
I will take a hard look at my Net Income and Cash Flow Forecast model for CRZO and post an update under the Sweet 16 Tab by noon today. My current Fair Value estimate will be shown at the bottom of the forecast. I do think the asset sale is a good move. It firms up the Balance Sheet and helps them focus on increasing their liquids production from the Eagle Ford.
CRZO is going to report a big jump in liquids production for Q1 that should draw a lot of attention to this stock.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: CRZO selling assets to ARP
This is good news.
March 20 - Standard & Poor's Ratings Services today said it raised it issue
rating on Houston-based Carrizo Oil & Gas Inc.'s (Carrizo) senior
unsecured notes to 'B' (same as the corporate credit rating on the company) from
'B-', and revised its recovery rating on the notes to '4' from '5', indicating
our expectation of average (30% to 50%) recovery in the event of a payment
default. The 'B' corporate credit rating on the company remains unchanged.
The improved recovery expectation reflects an updated valuation of Carrizo's
midyear 2012 reserves following recent reserve development despite the
divestiture of a portion of the company's properties in the Barnett Shale. Our
updated valuation is based on a company-provided PV10 report, using Standard &
Poor's recovery methodology and stressed price deck assumptions of $45 per
barrel for West Texas Intermediate crude oil and $4 per million Btu for Henry
Hub natural gas. This update results in a modest increase to the valuation,
triggering the revision in our recovery rating.
The upgrade on the notes reflects the higher recovery rating, which previously
had been one notch down from the corporate credit rating.
The ratings on Carrizo reflect what Standard & Poor's categorizes as Carrizo's
"aggressive" financial risk and "vulnerable" business risk, as our criteria
define the terms. With current leverage of 4.2x at year-end 2011, Carrizo has
a levered balance sheet, but we expect this ratio to decrease to below 3.5x in
2012 as the company ramps up production and continues to switch to more
liquids-rich production. As a participant in the highly cyclical and
competitive oil and gas exploration and production (E&P) industry, Carrizo is
susceptible to commodity prices, particularly with respect to natural gas, the
company's principal product and one that continues to suffer from weak prices.
Finally, ratings reflect Carrizo's modest-sized reserve and production base
concentrated in a few resource plays.
March 20 - Standard & Poor's Ratings Services today said it raised it issue
rating on Houston-based Carrizo Oil & Gas Inc.'s (Carrizo) senior
unsecured notes to 'B' (same as the corporate credit rating on the company) from
'B-', and revised its recovery rating on the notes to '4' from '5', indicating
our expectation of average (30% to 50%) recovery in the event of a payment
default. The 'B' corporate credit rating on the company remains unchanged.
The improved recovery expectation reflects an updated valuation of Carrizo's
midyear 2012 reserves following recent reserve development despite the
divestiture of a portion of the company's properties in the Barnett Shale. Our
updated valuation is based on a company-provided PV10 report, using Standard &
Poor's recovery methodology and stressed price deck assumptions of $45 per
barrel for West Texas Intermediate crude oil and $4 per million Btu for Henry
Hub natural gas. This update results in a modest increase to the valuation,
triggering the revision in our recovery rating.
The upgrade on the notes reflects the higher recovery rating, which previously
had been one notch down from the corporate credit rating.
The ratings on Carrizo reflect what Standard & Poor's categorizes as Carrizo's
"aggressive" financial risk and "vulnerable" business risk, as our criteria
define the terms. With current leverage of 4.2x at year-end 2011, Carrizo has
a levered balance sheet, but we expect this ratio to decrease to below 3.5x in
2012 as the company ramps up production and continues to switch to more
liquids-rich production. As a participant in the highly cyclical and
competitive oil and gas exploration and production (E&P) industry, Carrizo is
susceptible to commodity prices, particularly with respect to natural gas, the
company's principal product and one that continues to suffer from weak prices.
Finally, ratings reflect Carrizo's modest-sized reserve and production base
concentrated in a few resource plays.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: CRZO selling assets to ARP
It is very important to understand that even though the sale has as Effective Date of 1-1-2012, the gas production and revenue for these properties will be included in CRZO reported earnings until the deal closes in late April. - Dan
HOUSTON, TX -- (MARKET WIRE) -- 03/16/2012 -- Carrizo Oil & Gas, Inc. (NASDAQ: CRZO) today announced that it has entered into a definitive agreement to sell a portion of its properties in the Barnett Shale (or "Divested Properties") to a subsidiary of Atlas Resource Partners, L.P. (NYSE: ARP) for $190 million in cash. This sale will have an effective date of January 1, 2012 and is expected to close in late April, subject to customary closing conditions and purchase price adjustments. The producing properties that are being sold include 221 gross (approx. 110 net) wells currently producing at an approximate net rate of 35 MMcfe per day (predominantly dry gas). Estimated total proved reserves associated with the Divested Properties, as determined by Carrizo's third party engineer at year-end 2011, is approximately 312 Bcfe (comprised of 177 Bcfe of proved developed and 135 Bcfe of proved undeveloped reserves), of which 53 Bcfe are non-operated. The Company intends to use the net proceeds from this sale to repay borrowings under its revolving credit facility and use the excess proceeds to partially fund its 2012 capital expenditures plan, largely in the Eagle Ford play. Carrizo estimates that when its borrowing base is redetermined (scheduled for April) it will be around $300 million after adjusting for: (i) the impact of the Divested Properties and (ii) the significant benefit from oil/liquids developed reserve additions in the first quarter 2012 (largely related to the Eagle Ford development). EBITDA from the Divested Properties will continue to be included in Carrizo's financial results until closing in late April.
Carrizo President and CEO S. P. "Chip" Johnson IV commented on the sale, "Our corporate strategy has been to focus our capital expenditures on the highest return plays such as our liquids-rich Eagle Ford and Niobrara properties. We have significantly slowed the pace of development of our dry gas properties in the Barnett Shale due to low natural gas prices. However, we had several strong indications of interest in this quality gas asset and are pleased to be able to announce this sale to Atlas. The resulting increase in liquidity generated by the sale of these properties will increase our flexibility to fund our announced 2012 capital investment plan that is focused on investment in liquids-rich resource plays while maintaining appropriate debt levels on our revolver."
HOUSTON, TX -- (MARKET WIRE) -- 03/16/2012 -- Carrizo Oil & Gas, Inc. (NASDAQ: CRZO) today announced that it has entered into a definitive agreement to sell a portion of its properties in the Barnett Shale (or "Divested Properties") to a subsidiary of Atlas Resource Partners, L.P. (NYSE: ARP) for $190 million in cash. This sale will have an effective date of January 1, 2012 and is expected to close in late April, subject to customary closing conditions and purchase price adjustments. The producing properties that are being sold include 221 gross (approx. 110 net) wells currently producing at an approximate net rate of 35 MMcfe per day (predominantly dry gas). Estimated total proved reserves associated with the Divested Properties, as determined by Carrizo's third party engineer at year-end 2011, is approximately 312 Bcfe (comprised of 177 Bcfe of proved developed and 135 Bcfe of proved undeveloped reserves), of which 53 Bcfe are non-operated. The Company intends to use the net proceeds from this sale to repay borrowings under its revolving credit facility and use the excess proceeds to partially fund its 2012 capital expenditures plan, largely in the Eagle Ford play. Carrizo estimates that when its borrowing base is redetermined (scheduled for April) it will be around $300 million after adjusting for: (i) the impact of the Divested Properties and (ii) the significant benefit from oil/liquids developed reserve additions in the first quarter 2012 (largely related to the Eagle Ford development). EBITDA from the Divested Properties will continue to be included in Carrizo's financial results until closing in late April.
Carrizo President and CEO S. P. "Chip" Johnson IV commented on the sale, "Our corporate strategy has been to focus our capital expenditures on the highest return plays such as our liquids-rich Eagle Ford and Niobrara properties. We have significantly slowed the pace of development of our dry gas properties in the Barnett Shale due to low natural gas prices. However, we had several strong indications of interest in this quality gas asset and are pleased to be able to announce this sale to Atlas. The resulting increase in liquidity generated by the sale of these properties will increase our flexibility to fund our announced 2012 capital investment plan that is focused on investment in liquids-rich resource plays while maintaining appropriate debt levels on our revolver."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group