Bill Barrett (ticker: BBG) announced the acquisition of Fifth Creek Energy after markets closed Tuesday, in a transaction valued at about $650 million.
The agreement will see Bill Barrett and Fifth Creek each become subsidiaries of a new holding company, referred to as “New BBG.”
Bill Barrett’s shareholders will exchange their shares for New BBG shares on a 1-for-1 basis, while privately-held Fifth Creek will receive 100 million shares of the new company. Bill Barrett reports that, based on its current stock price, the consideration delivered to Fifth Creek’s owner implies a transaction value of $649 million. Bill Barrett currently has about 76 million shares outstanding, so Fifth Creek will be the majority shareholder of the new company.
Bill Barrett also agreed to a debt exchange with the holder of its 2022 notes, in which the holder has agreed to exchange $50 million aggregate principal amount of the notes for newly issued shares of the company’s common stock plus the cash payment of accrued and unpaid interest. The number of shares exchanged will be calculated based on the volume-weighted average price of trading on December 6, 2017 and the value of the bonds will be at 102% of par.
Privately held Fifth Creek holds a large position in the rural portion of the DJ play. According to the company’s presentation at EnerCom’s The Oil & Gas Conference® last August, Fifth Creek holds about 80,300 net acres, with a very high oil cut.
Fifth Creek is producing about 2,900 BOEPD from its Hereford Field operations, 72% of which is oil. According to Bill Barrett, the Hereford Field has some of the best wells in the DJ basin, with seven recent wells avenging 1,052 BOEPD.
Bill Barrett reports the combined company will hold 151,100 net acres and an inventory of 2,865 drilling locations. Bill Barrett and Fifth Creek have 168 MMBOE of proved reserves and produced 24 MBOEPD in Q3.
Bill Barrett has announced it plans to operate three drilling rigs in 2018, spending $500-$600 million.
The press release issued by Bill Barrett Corp. on Tuesday said the companies expect the transaction expected to close late in the first quarter or early in the second quarter of 2018, pending shareholder and regulatory approvals. The companies are hosting a conference call at 8:30 a.m. Eastern Time Wednesday, Dec. 6.
BBG announces common stock offering
Bill Barrett also announced today that it will offer for sale 21,000,000 shares of its common stock in an underwritten public offering. J.P. Morgan will serve as sole bookrunner for the offering. The common stock will be issued pursuant to a prospectus supplement and an accompanying prospectus filed as part of an effective shelf registration statement filed with the Securities and Exchange Commission on Form S-3.
The company intends to use the net proceeds from the offering for general corporate purposes, including to finance future capital expenditures, BBG said in a press release.
After the announcement of the offering, BBG priced the underwritten public offering of 21,000,000 shares of its common stock for total gross proceeds (before underwriters’ compensation and estimated expenses) of $105 million. The company has granted the underwriters in the offering an option for 30 days to purchase up to an additional 3,150,000 shares of the company’s common stock to cover over-allotments, if any.
