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Atlas Resource Partners, L.P. To Acquire 277 Bcfe Of Proved Reserves In The Barnett Shale For $190 Million

Atlas Resource Partners, L.P. (NYSE: ARP) has entered into a definitive purchase and sale agreement to acquire approximately 277 bcfe of proved reserves, including undeveloped drilling locations, in the Barnett Shale in Texas from Carrizo Oil & Gas (NASD: CRZO) for approximately $190 million, or $0.69 per mcfe. The transaction has been approved by ARP’s board of directors, and will be effective as of January 1, 2012, with an expected closing in late April, subject to customary closing conditions.

This transaction is expected to be immediately accretive to ARP’s adjusted EBITDA and distributable cash flow. Based on this transaction, ARP is increasing its distribution guidance for the second half of 2012 from $0.80 per limited partner common unit (implied from the previous full year 2012 distribution guidance of $1.60) to a range of $0.85 to $0.90. In addition, ARP is introducing full year 2013 distribution guidance in a range of $2.25 to $2.40 per unit, a 45% increase over the original full year 2012 guidance of $1.60. Both second half 2012 and full year 2013 distribution expectations assume a coverage ratio of approximately 1.2x.

Edward E. Cohen, Chief Executive Officer of ARP, commented, “This transaction is the first step in the execution of our growth strategy for ARP. These Barnett Shale assets are ideal – long-lived, producing assets which generate increased cash flow and distributions per unit. I offer congratulations to our unitholders, and appreciation to our team that worked hard to achieve this acquisition almost simultaneously with the birth of ARP.”

Matthew A. Jones, President and Chief Operating Officer of ARP, added, “These assets are well-positioned in the core of the Barnett Shale, and offer our enterprise an opportunity to establish a growing operation in this region.”

Transaction Details:

  • Approximately 277 Bcfe of proved reserves, including 198 gross producing wells on over 12,000 net acres
  • 99% natural gas; 52% proved developed
  • Current net production of approximately 36 MMcfe per day
  • R/P ratio of over 20 years
  • Approximately 100 gross PUD and PDNP locations
  • Lease operating expenses of approximately $0.60 per mcfe

Pro Forma Financial Impact:

  • Distribution guidance:
    • Second half of 2012: $0.85 to $0.90 per limited partner unit
    • Full year 2013: $2.25 to $2.40 per limited partner unit
  • Adjusted EBITDA guidance:
    • Second half of 2012: $40 to $45 million
    • Full year 2013: $110 to $125 million
  • Distributable cash flow guidance:
    • Second half of 2012: $33 to $38 million
    • Full year 2013: $90 to $105 million
  • Targeted distribution coverage ratio of approximately 1.2x
  • Expected 2012 debt to adjusted EBITDA ratio of approximately 1.0x
  • Net proved reserves of approximately 435 bcfe, an increase of approximately 165% over existing net proved reserves of 167 bcfe

Transaction Financing

The Barnett Shale acquisition has been fully committed through:

  • A private placement of equity to institutional investors of $120 million, representing 6 million ARP common units at $20 per unit; and,
  • Approximately $70 million borrowed against ARP’s revolving credit facility

Concurrent with the closing of the transaction, ARP expects that its lending group will expand the capacity on its revolving credit line to a borrowing base of approximately $250 million.

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