Carrizo Oil & Gas, a Houston-based producer among the larger operators in North Texas’ Barnett Shale, said Friday it agreed to sell $190 million worth of properties in the field to Atlas Resource Partners.Carrizo said the deal, expected to close in late April, involves 12,000 acres with 110 net producing wells in “noncore” areas. A Carrizo representative would not be more specific, but the company has previously described its Barnett Shale core as being Tarrant County, including 22 wells on the campus of the University of Texas at Arlington.
The company said it will use sales proceeds to reduce debt and help fund drilling, mostly in the Eagle Ford Shale in South Texas. Carrizo, like many other producers, says it is focusing spending on properties like the Eagle Ford and Niobrara Shale in eastern Colorado, which produce more of the oil and liquids that command much higher prices than natural gas.
Atlas, based in Philadelphia, is a master limited partnership with holdings in Appalachia and the Niobrara. Master limited partnerships generally acquire established properties on behalf of investors who are looking for steady income.Atlas CEO Edward Cohen called the deal “the first step” in a growth strategy. He said the Barnett acquisition provides “long-lived, producing assets” that will increase payouts to Atlas unitholders.
Atlas said the properties produce the equivalent of about 36 million cubic feet of natural gas daily from 277 billion cubic feet of proved reserves. It put the purchase price at 69 cents per 1,000 cubic feet and said the properties cost about 60 cents per 1,000 cubic feet to operate.In its statement, Carrizo estimated its proved reserves at 315 billion cubic feet and put production at 35 billion cubic feet a day.
Investors liked the deal, especially for Atlas.Its units (ticker: ARP) jumped more than 30 percent Friday to $28.30 on about 14 times the usual daily trading volume on the New York Stock Exchange. Carrizo’s shares (CRZO) rose 1 percent to $30.The disparity in investor reaction is likely explained by the relatively low price Atlas is paying, which comes to less than $6,000 per 1,000 cubic feet of daily production. That compares to the roughly $12,000 per 1,000 cubic feet of daily production that private equity firm KKR paid Carrizo in May 2011 for noncore Barnett properties.
-- Jim Fuquay