Penn Virginia Eagle Ford acquisition puts drill bit on contiguous acreage for extended reach laterals

Penn Virginia Corporation (ticker: PVAC) closed its previously announced acquisition of Eagle Ford assets located primarily in Lavaca County, Texas on September 29, 2017. Penn Virginia bought the assets from Devon Energy Corporation (ticker: DVN) for $205 million in cash, subject to customary post-closing adjustment to reflect net cash flows from the effective date of March 1, 2017 to closing.

New $200 million second lien term loan

In connection with the acquisition, Penn Virginia entered into a credit agreement for a new $200 million second lien term loan with an initial interest rate of LIBOR for a three-month interest period + 7.00% and maturing in September 2022.

Penn Virginia said it used the net proceeds from the term loan and additional borrowings under the its revolving credit facility to finance the Devon acquisition and related expenses.

Amounts outstanding under the term loan may be prepaid at any time at the option of the company, subject to a make-whole premium in year one and a 102% and 101% premium in years two and three, respectively.

Borrowing base increased to $238 million

Penn Virginia said that the borrowing base under its revolving credit facility was increased from $200 million to approximately $238 million in connection with the Devon acquisition and the fall borrowing base redetermination.

Acquisition allows contiguous acreage and extended reach laterals

“Our operations team knows this area very well as the Devon acreage is contiguous to our existing acreage position and we have identified a significant number of locations for drilling extended reach laterals with superior economics,” said John A. Brooks, Chief Executive Officer of Penn Virginia.

“Because of the high quality of this asset, the company upsized the second lien term loan by $50 million and we received a significant increase to our borrowing base under our revolving credit facility.  We strongly believe this acquisition is an ideal fit and will play a key role in our long-term growth strategy for Penn Virginia,” Brooks said in a statement.

Gibson, Dunn & Crutcher LLP served as legal counsel to Penn Virginia for the acquisition and the financing. Jefferies Finance LLC is the administrative agent, collateral agent and sole lead arranger for the term loan financing.


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