Natural gas assets from Tanos Energy will be acquired by Diversified Energy, in conjunction with Oaktree Capital Management. The acquisition has a value of around $308 million, and the assets locate in the states of Texas and Louisiana.
Firstly, the firms will purchase the Cotton Valley and Haynesville upstream assets, and the related facilities to them, which are located in Louisiana and Texas, respectively.
Secondly, the purchase will also include 390 net operated wells; which have a combined production capacity of 14,000 barrels of oil equivalent per day.
Thirdly, Diversified Energy will have a 51.25% working interest in the assets while Oaktree will own the remainder. However, Diversified Energy will rise its share to 60%, one Oaktree reaches a 10% internal rate of return (IRR) on its investment.
In addition, the deal is the first participation for Oaktree under a joint-participation agreement signed in October 2020.
Moreover, the transaction is still subject to customary diligence, reviews and approvals; however, it is expected to reach completion by mid-August, 2021.
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Natural gas assets to add Diversified’s portfolio and liquidity
On the other hand, Diversified energy will finance the natural gas assets acquisition, with cash reserves and existing credit capacity, according to the statement. Additionally, this is not the first accord between Oaktree and Diversified.
In fact, Oaktree agreed to acquire 48.75% of the assets that Diversified recently acquired in the Cotton Valley/Haynesville region; from Indigo Minerals for $58m. Separately, Diversified Energy concluded the acquisition of certain upstream assets and related infrastructure; within its Central Regional Focus Area from Blackbeard Operating for a net consideration of around $166m.
Consequently, all of these transactions and acquisitions will advance Diversified’s efforts to broaden its operating footprint within the Central Regional Focus Area.
About this, and the natural gas assets acquisition, Rusty Hutson Jr, Diversified Energy CEO, said. “Oaktree’s participation not only demonstrates the attractive nature of these acquisitions; but also affords diversified additional liquidity and line of sight to identify and pursue opportunities; while continuing to maintain a strong balance sheet.”
Finally, he remarked. “Similar to our nearby and recently closed acquisition of Indigo assets in the Cotton Valley area, the Barnett area provides access to a portfolio of future consolidation opportunities.”