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Equal Energy Announces Sale Of Northern Oklahoma Assets And Decision To Retain Central Oklahoma Hunton Assets

CALGARY, Alberta, Sept. 24, 2012 /PRNewswire/ - Equal Energy Ltd. ("Equal" or "the Company") (TSX: EQU) (NYSE: EQU) is pleased to announce that, through one of its wholly owned subsidiaries, it has closed an agreement with Atlas Resource Partners, L.P. ("Atlas") (NYSE: ARP) whereby Equal has sold its interest in its Northern Oklahoma assets located in Grant, Garfield and Alfalfa counties for total cash consideration of US$40 million, effective July 1 st 2012.  The assets sold include production of 1,400 barrels of oil equivalent per day ("boe/day") ( July 2012 average; 73% natural gas, 25% NGL, 2% oil), related infrastructure and interests in approximately 8,550 acres of Mississippian lands.

Don Klapko, President and Chief Executive Officer said, "The sale of the Northern Oklahoma asset is a key part of Equal's strategic direction which will:
  • High grade our Oklahoma business by focusing on the Central Oklahoma area where the liquids content is higher than in the Northern asset,
  • Retain the majority of our Oklahoma assets providing significant upside for our shareholders associated with any recovery of natural gas and NGL prices to more historical levels,
  • Best fit the risk-reward profile of a company our size in an area where we've had greater than 90 percent drilling success and have a multi-year inventory of drilling prospects, and
  • Further improve the Company's balance sheet.

I believe the decision to sell Northern Oklahoma and retain Central Oklahoma sets up significant potential benefit for our shareholders.  Equal's remaining Central Oklahoma assets are very focused with identified drilling inventory backed by a proven track record of drilling success as well as upside from improving commodity prices."

The Northern Oklahoma sale is at an attractive valuation as the Company received the equivalent amount of $2,500 per acre for its remaining Mississippian acreage plus approximately 6 times annualized operating cash flows from the Northern Oklahoma assets based on the first six months of 2012.

Equal will use the proceeds of the sale to reduce amounts outstanding on its credit facility to approximately $70 million and total debt to approximately $115 million.  The Company's banking syndicate is reviewing the limit on the $200 million credit facility in light of this disposition.  Equal expects the proceeds of $40 million will materially exceed the borrowing base associated with the Northern Oklahoma assets.  The Central Oklahoma assets currently produce 7,800 boe/day of natural gas, rich with NGL's which comprise 48% of total volume.  Adjusting for the sale, Equal's July corporate production was 9,350 boe/d consisting of 45% natural gas, 42% NGL's and 13% oil compared to 50%, 39% and 11% before the sale.

The Strategic Review is ongoing and management and the Special Committee of the board of directors continue to make progress as we turn our focus to Equal's Canadian strategy and potential transactions that we believe will further benefit our shareholders.

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