STATE COLLEGE, Pa. & IRVING, Texas–(BUSINESS WIRE)–Eclipse Resources Corporation (NYSE:ECR) (the “Company” or “Eclipse Resources”) and Blue Ridge Mountain Resources, Inc. (OTCPK: BRMR) (“Blue Ridge”) today announced that they have entered into a definitive merger agreement under which Eclipse Resources and Blue Ridge will combine in an all-stock transaction (the “Transaction”). In the Transaction, Blue Ridge stockholders will receive consideration consisting of 4.4259 shares of Eclipse Resources common stock for each share of Blue Ridge common stock, before adjustment for a 15-to-1 reverse stock split of Eclipse Resources common stock to be effected concurrently with closing of the Transaction. Based on the closing price of Eclipse Resources common stock on August 24, 2018, the Transaction implies an enterprise value for the combined company of approximately $1.4 billion and an equity value of approximately $908 million1. The Transaction has been unanimously approved by the board of directors of each company, and has been approved by the written consent of stockholders of Eclipse Resources holding a majority of the outstanding common shares of Eclipse Resources. Stockholders of Blue Ridge owning approximately 60% of the outstanding common shares of Blue Ridge have entered into a voting agreement with both companies to, among other things, vote or provide written consents in favor of approval of the Transaction, subject to certain terms and conditions.
In conjunction with this joint press release, Eclipse Resources and Blue Ridge have posted a presentation with additional details regarding the Transaction to their respective corporate websites. For Eclipse Resources, the presentation is posted to the Investor Center of its website at www.eclipseresources.com and for Blue Ridge, the presentation is posted to the Investors tab of its website at www.brmresources.com.
Pro Forma Transaction Highlights
- Scale: Creating one of the largest Utica focused operators with Q4 2018 estimated production of 500-560 MMcfe per day2 and ~227,000 net effective undeveloped core acres providing over 20 years of prolific wet and dry gas inventory
- Debt Metrics: Leverage ratio of ~2.1x based on pro forma debt to Q2 2018 annualized EBITDAX with line of sight to 1.5x – 1.7x of annualized EBITDAX in Q4 20183
- Liquidity: $312 million4 near term liquidity including an estimated $150 million increase in the borrowing base under the Company’s revolving credit facility at close and no near term debt maturities
- Growth: Self-funded 2-3 rig business plan targeting annual production growth greater than 20% and becoming cash flow generating in 20205
- Management and Operational Excellence: John Reinhart, President and CEO of Blue Ridge, to become President and CEO of the combined company and will lead a management team that leverages both companies’ proven operating expertise in the basin
- Corporate Synergies: Transaction enhances capital efficiency and operating margins on a per unit basis while providing approximately $15 million in anticipated annual corporate G&A savings across the combined asset base6
- Midstream and Downstream Synergies: Shared midstream providers along with an expanded production base allow for increased optionality and optimization of midstream and downstream commitments, producer netbacks and decreasing weighted average transportation costs due to growth in uncommitted combined natural gas volumes
- Consolidation Platform: Combined company positioned for accretive acquisitions to add scale and cash flow
1 Based on second quarter 2018 financial statements
2 Based on estimated combined company initial estimates subject to revision upon closing
3 Based on estimated combined company Q4 EBITDAX estimates of $90-110 million, pro forma for potential transition costs
4 Based on initial estimated combined company corporate revolving credit facility borrowing base of $375 million, subject to bank approval and syndication process; net of outstanding letters of credit
5 Cash flow is defined as EBITDAX less capital costs
6 Based on combined company initial estimates subject to revision upon closing
Benjamin W. Hulburt, Chairman, President and CEO of Eclipse Resources, commented on the Transaction, “This transaction provides a compelling opportunity for both Eclipse Resources and Blue Ridge shareholders to benefit from the strength of the combined company. This combination allows both of us to consolidate premier assets that significantly increase the Company’s production and cash flow, seamlessly fit into a consolidated drilling program and provide for considerable G&A synergies, all while allowing for accelerated growth without adding to the Company’s debt obligations.”
John Reinhart, President and CEO of Blue Ridge, commented, “We are excited about the highly complementary nature of this combination. Based on pro forma estimated fourth quarter of 2018 production of 500-560 MMcfe per day, a high performing management team, strong balance sheet, high quality asset base, and expected corporate, operational, and midstream synergies, we believe the combined company will possess a substantial scale advantage and an excellent foundation for significant organic growth with attractive cash flows while maintaining the optionality for bolt-on value-accretive acquisitions within the basin.”
Terms of the Transaction
Under the terms of the Transaction, a newly-formed subsidiary of Eclipse Resources will be merged into Blue Ridge, with Blue Ridge surviving as a wholly-owned subsidiary of Eclipse Resources. In the merger, Blue Ridge stockholders will receive 4.4259 shares of Eclipse Resources common stock for each share of Blue Ridge common stock held by them, representing consideration to each Blue Ridge stockholder of $7.44 per share based on the closing price of Eclipse Resources common stock on August 24, 2018. The exchange ratio will be adjusted to reflect a 15-to-1 reverse stock split of the Eclipse Resources common stock to be effected concurrently with closing of the Transaction. Upon closing of the Transaction, existing Eclipse shareholders will own approximately 57.5% of the outstanding shares of the combined company and Blue Ridge shareholders will own approximately 42.5%.
EnCap Investments, owning collectively approximately 57% of the outstanding shares of common stock of Eclipse Resources, have entered into a voting agreement with Eclipse Resources and Blue Ridge to, among other things, provide the written consents approving the Transaction, which have been delivered by them concurrently with the signing of the merger agreement.
Certain stockholders of Blue Ridge owning approximately 60% of the outstanding shares of common stock of Blue Ridge have entered into a voting agreement with Eclipse Resources and Blue Ridge to, among other things, vote or provide written consents in favor of approval of the Transaction, subject to certain terms and conditions.
The Transaction is expected to close in the fourth quarter of 2018 and is subject to customary regulatory approvals, approval by the holders of a majority of Blue Ridge common stock, and certain other customary closing conditions.
Organization and Leadership
Upon closing of the Transaction, John Reinhart, the current President and CEO of Blue Ridge, will serve as President and CEO of the combined company. It is anticipated that there will be four direct reports to the CEO. Matthew DeNezza, the current Executive Vice President and CFO of Eclipse Resources, will serve as the interim CFO for the combined company through November 30, 2018 or until the permanent CFO is publicly announced prior to November 30, 2018. Oleg Tolmachev, the current Executive Vice President and COO of Eclipse Resources, will continue to serve the combined company in that capacity. Paul Johnston, currently Senior Vice President and General Counsel of Blue Ridge, will become Executive Vice President and General Counsel of the combined company. Matthew Rucker, currently Vice President Resource Planning and Development of Blue Ridge, will become Senior Vice President Resource Planning and Development for the combined company. At closing, the board of directors of Eclipse Resources will become a declassified board and will consist of a total of ten directors, five designated by Eclipse Resources and five designated by Blue Ridge (one of whom will be John Reinhart).
A joint conference call to review the Transaction is scheduled for Monday, August 27, 2018 at 10:00am Eastern Time. To participate in the call, please dial 877-709-8150 or 201-689-8354 for international callers and reference Eclipse Resources–Blue Ridge Business Combination Call. A replay of the call will be available through October 3, 2018. To access the phone replay dial 877-660-6853 or 201-612-7415 for international callers. The conference ID is 13682942. A live webcast of the call may be accessed through the Investor Center on the Company’s website at www.eclipseresources.com. The webcast will be archived for replay on the Company’s website for six months.
Advisors and Counsel
Jefferies LLC is acting as financial advisor to Eclipse Resources, and Norton Rose Fulbright US LLP is acting as legal advisor to Eclipse Resources. Vinson & Elkins LLP is acting as legal advisor to EnCap Investments, the majority stockholder of Eclipse Resources.
Barclays is acting as financial advisor to Blue Ridge, and Bracewell LLP is acting as legal advisor to Blue Ridge.
About Eclipse Resources Corporation
Eclipse Resources is an independent exploration and production company engaged in the acquisition and development of oil and natural gas properties in the Appalachian Basin, including the Utica and Marcellus Shales. For more information, please visit the Company’s website at www.eclipseresources.com.
About Blue Ridge Mountain Resources, Inc.
Blue Ridge is an Irving, Texas-based independent exploration and production company engaged in the acquisition, development and production of natural gas and natural gas liquids. Blue Ridge is active in two of the most prolific unconventional shale resource plays in North America, the Marcellus and Utica Shales. For more information, please visit Blue Ridge’s website at www.brmresources.com.
No Offer or Solicitation
This communication relates to a proposed business combination transaction (the “Transaction”) between Eclipse Resources Corporation (“Eclipse Resources”) and Blue Ridge Mountain Resources, Inc. (“Blue Ridge”). This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, in any jurisdiction, pursuant to the Transaction or otherwise, nor shall there be any sale, issuance, exchange or transfer of the securities referred to in this document in any jurisdiction in contravention of applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.