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EV Energy Partners, L.P. (EVEP) today announced it has entered into four agreements with certain EnerVest Institutional Partnerships (EnerVest) to acquire oil and natural gas properties, which represent combined estimated net proved reserves of 302 Bcfe, in the Appalachian Basin, San Juan Basin, Michigan and Austin Chalk for a combined cash consideration of $259 million.  The acquisitions are expected to close on October 1 and are subject to customary closing conditions and purchase price adjustments.  EVEP plans to fund the acquisitions with available cash and borrowings under its revolving credit facility.

One of the acquisitions is the purchase of a 100 percent ownership interest in Belden & Blake Corporation (Belden).  Belden owns oil and natural gas properties in the Appalachian Basin and Michigan near EVEP’s existing properties.  Belden’s estimated net proved reserves are 120 Bcfe.  As a result of the transaction, Belden will become a wholly-owned indirect subsidiary of EVEP and will remain a C-Corp, subject to state and federal taxation.  EVEP’s valuation of Belden included an assessment of future taxation at Belden as well as its working capital and other net assets.  At recent strip prices, EVEP estimates that corporate taxes at Belden will be negligible for the remainder of 2015 and less than $1.0 million annually for 2016 and 2017.

The remaining properties to be acquired, which represent combined estimated net proved reserves of 182 Bcfe, include additional working interests in certain of EVEP’s existing Austin Chalk and Appalachian Basin properties and additional properties located near EVEP’s existing San Juan Basin position.  The San Juan asset is currently subject to a volumetric production payment (VPP) owned by a third party which expires at the end of 2016.  The VPP volumes are approximately 6.0 and 5.1 Mmcf/d of production for the remainder of 2015 and 2016, respectively.  The acquisitions do not include Utica Shale or Eagle Ford formation rights.

Highlights of the combined acquisitions include:

  • Estimated net proved reserves of approximately 302 Bcfe (net of the San Juan Basin VPP), which are 69 percent natural gas, 15 percent natural gas liquids, 16 percent crude oil; 95 percent are classified as proved developed
  • Current production of 55 Mmcfe/d (net of the San Juan Basin VPP volumes of 6 Mmcf/d)
  • Proved reserves-to-production ratio of 15.0 years (13.7 years including VPP volumes)
  • Proved developed decline rate of 8 percent
  • Adds over 9,400 producing wells, which are approximately 83 percent operated

“We are pleased with the opportunity to build on our existing positions in Appalachia, Michigan, San Juan and the Austin Chalk.  Our operating company has a long, successful track record with these assets.  The transactions will increase EVEP’s percentage of proved developed reserves, reduce our annual production decline and provide a greater amount of basin diversification,” stated Michael Mercer, President and Chief Executive Officer.

The terms of the transactions were approved by the Board of Directors and by the Board’s Conflicts Committee, which was comprised entirely of independent directors.  The Conflicts Committee engaged Robert W. Baird & Co. Incorporated to act as its financial advisor and Andrews Kurth LLP to act as its legal counsel.

Hedging Update

EVEP has recently added the following natural gas swaps:

Period

Index

Swap Volume

Swap Price

(Mmmbtus)

2016

NYMEX

3,660.0

$2.945

2017

NYMEX

7,300.0

$3.093

Additionally, Belden owns the existing hedges detailed below, which will be included in the Belden acquisition:

Period

Index

Swap Volume

Swap Price

Natural Gas (Mmmbtus)

4Q 2015

NYMEX

1,380.0

$3.167

2016

NYMEX

3,294.0

$3.203

Crude (Mbbls)

4Q 2015

WTI

44.9

$77.591

Ethane (Mbbls)

2016

Mt Belvieu

3.7

$9.135

Period

Index

Put Volume

Floor Price

Ethane (Mbbls)

4Q 2015

Mt Belvieu

2.3

$10.500

Acquisition Guidance

For fourth quarter 2015, EVEP expects the following for the acquisitions:

($ in millions)

4Q15

Net Production

Natural Gas (Mmcf) (a)

3,380

3,500

Crude Oil (Mbbls)

140

145

Natural Gas Liquids (Mbbls)

125

130

Total Mmcfe

4,970

5,150

Average Daily Production (Mmcfe/d)

54

56

Average Price Differential vs NYMEX

Natural Gas ($/Mcf)

$0.42

$0.52

Crude Oil ($/Bbl)

$3.00

$5.00

NGL (% of NYMEX Crude Oil)

34%

37%

Expenses

Operating Expenses:

LOE and other

$8.5

$9.4

Production Taxes (as % of revenue)

6.4%

7.0%

General and administrative expense

$0.6

$1.6

E&P Capital Expenditures (b)

$0.2

$0.6

(a)

Excludes 6.0 Mmcf/d of production associated with an existing volumetric production payment on the San Juan properties that expires at the end of 2016

(b) 

Represents estimates for drilling and related capital expenditures. Does not include any amounts for acquisitions of oil and gas properties

Conference Call, Webcast and Supplemental Presentation

EV Energy Partners will host an investor conference call on September 3, 2015, at 10 a.m. Eastern Time (9 a.m. Central).  Investors interested in participating in the call may dial 1-888-312-3048 (quote conference ID 5611697) at least 5 minutes prior to the start time, or may listen live over the Internet through the Investor Relations section of the EVEP website athttp://ir.evenergypartners.com/events.cfm. Additionally, supplemental information regarding the acquisitions can be found in the Investor Relations section of the EVEP website.

About EV Energy Partners, L.P.

EV Energy Partners, L.P. is a master limited partnership engaged in acquiring, producing and developing oil and natural gas properties.  More information about EVEP is available on the Internet at http://www.evenergypartners.com.