US Energy, Denver, plans to acquire oil and natural gas producing properties targeting the Bakken formation of North Dakota from APEG I Partners.
The exclusive, non-binding memorandum of understanding includes all of APEG’s interest in 67 wells concentrated in Williams and McKenzie counties—assets “highly complementary” to US Energy’s existing portfolio in the state, according to a statement from the company. Current production is 400 boe/d across 1,600 net acres with 1.1 million boe of proved developed reserves, 79% of which is oil.
According to a statement from the company, the deal will create additional opportunities for development and acreage swaps that would permit it to continue consolidating its leasehold position in the area.
Total consideration is $17.8 million, which is a combination of cash, issuance of common and preferred stock, and the assumption of APEG’s outstanding commodity derivatives. The company plans to establish an $8-million revolving credit facility, for which the company has received a non-binding term sheet from a traditional reserved based lender. Subsequent to closing, US Energy plans to continue reducing leverage through positive cash flow from operations and potential strategic dispositions. The company plans on using the proceeds to reduce borrowings under the new credit facility.
“This is an exciting transaction for US Energy that, upon closing, will approximately double the company’s existing production base in a highly economic area in which we have significant experience,” David Veltri, US Energy’s Chief Executive Officer, said. “US Energy will remain focused on adding accretive assets that immediately increase the production, revenue and cash flow of the company.”
Closing is conditioned on debt and equity financing, Nasdaq approval, and stockholder approval at a special meeting scheduled for December.