Texas-based oil and natural gas exploration and production company Abraxas Petroleum Corp (NASDAQ:AXAS) said it had signed a letter of intent (LoI) to break-up its Blue Eagle Energy LLC joint venture with Blue Stone Oil & Gas LLC after the partners failed to dispose of the entity earlier this year.
Blue Eagle Energy was formed in 2010 to develop the Eagle Ford Shale play in South Texas. Abraxas explained that the sale of the JV had turned unsuccessful as the price of oil fell during negotiations and the at-first-acceptable bids were reduced too much.
Abraxas holds some 34.7% interest Blue Eagle Energy. Now the partners will separate the assets, so Abraxas will include its portion in its bank borrowing base, resulting in increased liquidity. The company will also cut the confusion coming out of joint venture accounting and be able to count in its operating metrics production, reserves and cash flow, it said.
Under the terms of the LoI, Abraxas will retain a 100% stake in the Eagleford and shallower rights in Jourdanton, Atascosa County; 100% in Yoakum, DeWitt County; 25% in WyCross, McMullen County; and a 25% interest in the Nordheim, DeWitt County assets. The company calculates that the producing wells it will take have a capacity of 205 barrels of oil equivalent per day. The proven reserves to go to Abraxas are estimated at around 2.4m barrels of oil equivalent, while the probable reserves are 3.7m barrels of oil equivalent. The company will also get $7m (€5.7) in cash plus its share of the joint venture’s working capital.
Furthermore, Abraxas said it had wrapped up a $7.2m deal to take a partner’s share in jointly owned properties in Ward County, West Texas. The transaction amount excludes closing adjustments. That acquisition expands the company’s portfolio by 240 barrels of oil equivalent production per day and some 1.2 million barrels of oil equivalent of proved developed producing reserves. Natural gas accounts for 95% of the acquired assets.