Constellation Energy Partners LLC (NYSE MKT: CEP) today announced that the PostRock Litigation has been settled. The PostRock Litigation was between CEP, certain of its current and former managers and executive officers, Constellation Energy Partners Management, LLC (“CEPM”), a wholly owned subsidiary of PostRock Energy Corporation (NASDAQ: PSTR), Sanchez Energy Partners I, L.P. (“SEPI”) and Sanchez Oil & Gas Corporation (“SOG”). Following the consummation of the settlement, SEPI will be the sole holder of CEP’s Class A units and it is expected that by the end of 2014 CEPM will have little or no continuing ownership interest in CEP.
“With the settlement of the PostRock Litigation, CEP can resume developing what we believe will be a transformative relationship with Sanchez Oil & Gas,” commented Stephen R. Brunner, President and Chief Executive Officer of CEP. “We expect that the relationship will provide CEP with additional asset acquisition opportunities, a means to achieving enhanced deal flow, and an opportunity to leverage the skills and personnel of Sanchez Oil & Gas, a proven operator with an outstanding technical team and experience that spans across multiple basins in the U.S.”
As a result of the settlement, the Class A units acquired by SEPI in the August 2013 transaction have been returned to CEP and cancelled; CEPM transferred 100% of its CEP Class A units to SEPI and also transferred 414,938 of CEP’s Class B units to SEPI in exchange for an aggregate payment of $1.0 million; and CEP paid $6.5 million to CEPM. In addition, pursuant to the terms of the settlement, CEPM agrees to sell its remaining Class B units over the next nine months, with SEPI providing up to a $5.0 million backstop payment to CEPM to the extent the proceeds received by CEPM from such sale do not meet or exceed a specified amount.