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American Energy Partners Spins Off Appalachia Subsidiary
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American Energy Appalachia Holdings, LLC announced that it is changing its name to Ascent Resources, LLC and is transitioning to a standalone operating company, fully independent of the broader American Energy Partners, LP (AELP) platform, a process that has been contemplated since the company's founding in September 2013 and that it expects to complete by year-end 2015. The primary equity owners of Ascent will be unchanged. Further, one of Ascent's two operating subsidiaries, American Energy - Utica, LLC (AEU), announced it has agreed to sell approximately 35,000 net acres and certain associated gathering assets to Gulfport Energy Corporation for approximately $407 million cash (subject to customary purchase price adjustments) and has completed a combined equity and debt financing of approximately $977 million. The combined proceeds of $1.4 billion will provide the company with $700 million of immediate liquidity after repaying certain existing debt. Ascent plans to efficiently deploy this capital for ongoing development of its world-class assets.
Jeffrey A. Fisher, Chairman of the Board and Chief Executive Officer, commented, "Today marks an extremely important day in the life of our company. These transactions place Ascent on strong footing from a liquidity standpoint and allow the company to continue to develop its tremendous asset base. We have what I believe are some of the very best assets in the Appalachian Basin and, therefore, the entire country. We are also pleased to announce the start of our long-anticipated migration to a standalone company, as Ascent Resources, LLC. We have worked diligently over the last two years to create a leading asset position and build a team with the operational talent to grow our production, reserves, and cash flow into the future. We appreciate the support that we received from our sponsors and AELP and look forward to taking Ascent to the next level."
The $977 million financing consists of $250 million of equity invested by affiliates of The Energy & Minerals Group (EMG), First Reserve, and Aubrey K. McClendon, as well as $250 million of senior secured debt, $200 million of which will be used to retire AEU's revolving credit facility, and $477 million of junior secured debt, $277 million of which will be used to retire an equal amount of AEU's existing convertible notes. The asset sale consists of approximately 35,000 net acres in Belmont, Monroe, and Jefferson Counties, Ohio that were not scheduled for near-term development by the company and are a better fit for Gulfport's planned development activities.
Pro forma for the asset sale, Ascent had estimated proved reserves of approximately 1.8 trillion cubic feet equivalent (73% natural gas) as of March 31, 2015, and approximately 235,000 net acres in the Utica and Marcellus shale plays in Ohio and West Virginia. Ascent's current estimated daily production is approximately 280 million cubic feet equivalent.
Created in December 2014 through the combination of the holding companies of AEU and American Energy – Marcellus, LLC (AEM), Ascent is one of the largest pure-play Appalachian E&P companies with approximately 235,000 net acres in the Utica and Marcellus shale plays, including 190,000 net acres in eastern Ohio and 45,000 net acres in northern West Virginia.