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Patina buys Cordillera; deal to increase reserves by 20%
Petroleum News
Rapidly growing Patina Oil & Gas of Denver, in its third deal since late 2002, has agreed to buy all of the assets of privately held independent Cordillera Energy Partners LLC for $244 million. The transaction includes 235 billion cubic feet of gas equivalent reserves and about 30,000 million cubic feet of equivalent per day of production.
Patina also said Aug. 24 that the Cordillera acquisition would establish a new core area for the exploration and production company in the San Juan basin of New Mexico and strengthen its position in the Anadarko basin of western Oklahoma and the Texas Panhandle.
“The Cordillera acquisition represents the largest purchase in our history and has substantial strategic value,” Patina Chairman Thomas Edelman said in a prepared statement.
Edelman is a former investment banker with a focus on growth. Late last year Patina struck separate deals to acquire small independents Bravo Natural Resources and Le Norman Partners for a total of $255 million. Those transactions added reserves of more than 328 billion cubic feet of gas equivalent and daily production of about 42,200 million cubic feet. Purchase would boost reserves by 20 percent Cordillera would further boost Patina reserves by 20 percent to more than 1.1 trillion cubic feet of gas equivalent. For the 2003 second quarter, Patina reported average daily production of 265,300 million cubic feet of equivalent, a 46 percent increase compared to the same period a year earlier. Revenues for the 2003 second quarter rocketed 82 percent to $92.4 million versus a year earlier.
Under terms of Patina's most recent transaction, Cordillera would receive $240.5 million in cash and five year warrants to purchase 500,000 shares of Patina common stock at a price of $45 per share. The deal is expected to close Oct. 1 and would be immediately accretive to earnings and cash flow, Patina said.
Patina said it would finance the acquisition with borrowing under its bank facility. At the end of the 2003 second quarter, Patina had reported debt of $239 million. That compares to just $52 million for the same period a year earlier.
Cordillera's principal shareholder is El Paso subsidiary EnCap Investments LP. The investment firm specializes in providing capital for both upstream and midstream independents and focuses on deals ranging up to $100 million.
Patina, a publicly traded company, incorporated in 1996. Its properties are concentrated in the Wattenberg field of Colorado's Denver-Julesburg basin, and the U.S. Midcontinent region of southern Oklahoma and the Texas Panhandle. Through its Elysium joint venture, Patina also maintains an interest in properties in Louisiana, Texas, Illinois, Kansas and California.
The Cordillera properties acquired by Patina consist of 93 percent natural gas and interests in 600 producing wells.
“The properties are believed to have significant development potential and generally produce from tight sand formations, providing opportunities for Patina to apply its expertise in fracture stimulation,” the company said.
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