Carrier buys Empyrean’s Sugarloaf stake for $61.5 million

PLS A&D Transactions - January 18, 2016

London-listed Empyrean Energy agreed to sell its primary asset—a 3% stake in the Marathon Oil-operated Sugarloaf Block B development in the Eagle Ford—to privately held Carrier Energy Partners II for initial cash consideration of $61.5 million. The deal calls for additional contingent payments up to $10 million if oil prices exceed $55/bbl in 2016 and $60/bbl in 2017. Closing is expected by the end of Q1, pending shareholder approval. Empyrean had 3Q15 net production of 7.5 MMcfe/d (13% NGLs, 7% condensate) from 290 wells on the 24,300-acre Block B. Proved reserves stood at 39.5 Bcfe at mid-2015, up 13.8% vs. YE14 driven by operational success at the field. After backing out production value at $4,650 per Mcfe/d, PLS estimates Carrier is paying $36,540 per acre for Empyrean’s 729 net acres in the block, a recent high mark for the Eagle Ford. Sugarloaf is generally considered a “core of the core” area of the play.

“The addition of these Eagle Ford shale properties of the Sugarloaf AMI project are a complement to our existing unconventional assets located in the Permian Basin,” Carrier CEO Mark Clemans said. Based in Houston and backed by Riverstone Holdings, Carrier participates as a non-op partner in capital-intensive development projects.

Empyrean CEO Tom Kelly said it was time to monetize Block B because financing continued participation at current oil prices “would incur either an unacceptable cost or unacceptable dilution when compared with the transaction.” Although Sugarloaf Block B has been Empyrean’s main focus in recent years, the exit will leave it with three other projects in its portfolio: 58.1% WI in the early-stage Eagle oil pool development operated by Strata-X Energy in Southern California’s San Joaquin Basin; up to 7.5% WI in eight producing wells operated by ConocoPhillips at Sugarloaf Block A; and 10% WI in the suspended Riverbend project tapping the Wilcox in East Texas.