DENVER, Sept. 14, 2017 (GLOBE NEWSWIRE) — Resolute Energy Corporation (“Resolute” or the “Company”) (NYSE:REN) announced today that it has entered into a definitive agreement to sell its subsidiary which holds interests in Aneth Field in the Paradox Basin of Southeastern Utah for total potential consideration of $195 million to an affiliate of Elk Petroleum Limited (ASX:ELK). Under the terms of the agreement, Resolute will receive cash consideration of $160 million at closing and additional cash consideration of up to $35 million if oil prices exceed certain levels in the next three years.
Rick Betz, Resolute’s Chief Executive Officer, said: “This sale is the final step in our previously announced strategy to transform Resolute into a pure-play Delaware Basin company. Closing this transaction will significantly improve our cost structure, strengthen our balance sheet and position the Company to accelerate the development of our prolific Delaware Basin property and continue our strong growth profile.
“As previously disclosed, second quarter lease operating expense for the Permian Basin was $4.87 per Boe which will approximate our Company LOE after completion of the transaction. Proceeds from the transaction are expected to repay the outstanding balance under our revolving credit facility, which we currently estimate will be approximately $130 million to $135 million at September 30, and significantly reduce our year-end leverage ratio. The expected transition of Resolute’s Aneth-dedicated staff to Elk, an established Rocky Mountain EOR producer, will allow Resolute to reduce future cash general and administrative expenses by approximately $6 million (before changes in overhead reimbursements) and stock based compensation by approximately $3 million annually.”
Resolute’s current 2017 production guidance is 24,000 to 28,000 Boe per day. Assuming the closing of the divestiture occurs by November 1, the Company’s 2017 production will be reduced by approximately 1,000 Boe per day. As previously disclosed, actual July production was 23,600 Boe per day in the Permian Basin and 29,500 Boe per day for the Company as a whole.
Under the terms of the definitive agreement, the buyer will fund a performance deposit of $10 million creditable against the purchase price. Pursuant to the contingent consideration provisions of the agreement, the buyer will pay Resolute $40,000 for each day in the twelve months after closing that the WTI spot oil price exceeds $52.50 per barrel (up to $10 million), $50,000 for each day in the twelve months following the first anniversary of closing that the oil price exceeds $55.00 per barrel (up to $10 million) and $60,000 for each day in the twelve months following the second anniversary of closing that the oil price exceeds $60.00 per barrel (up to $15 million). The transaction, which is expected to close in late October, has an effective date of October 1, 2017, and is subject to customary covenants, closing conditions and purchase price adjustments.
Petrie Partners, LLC and Barclays Capital Inc. acted as financial advisors to Resolute on the Aneth Field sale transaction. Resolute was represented by Arnold & Porter Kaye Scholer LLP.