In a move to add another oil and gas prospect, Oasis Petroleum Inc. announced, after the markets closed on Monday, that it has agreed to buy 20,300 net acres in West Texas’ Delaware Basin from EnCap Investments- and Pine Brook Partners-backed Forge Energy for $946 million. And three different Texas law firms grabbed a piece of the work around it.
Vinson & Elkins advised Houston-based Oasis with a team led by partner John B. Connally IV in Houston. The firm also worked on a related equity raise led by partner David Oelman, also of Houston.
It’s proved to be a busy time for Connally, who papered the Oasis deal after just leading the team advising Kayne Anderson-backed Valorem Energy on its purchase of Williston Basin assets from Linn Energy for $285 million. And Oelman recently assisted Oasis affiliate Oasis Midstream Partners on its $127.5 million initial public offering in September.
Counseling Forge was DLA Piper attorney Steven Torello, who has been at the firm for almost 10 years and was made a partner in 2015.
Thompson & Knight represented EnCap with a team that included partner Sarah McLean, who offices out of Austin and Houston, and Houston partner Todd Lowther (both of whom have advised EnCap before); partner Jesse Betts of Dallas; tax partner Roger Aksamit of Houston; associates Stephen Grant of Houston and Jessica Kirk of Dallas; and attorney Sarah Nealis of Austin.
Oasis general counsel Niko Lorentzatos said the in-house lawyers leading the transactions were managing counsel Natara Williams and senior counsel Jonathan Lancton on the asset acquisition and senior counsel Melissa Buce on the equity deal.
Lorentzatos has been general counsel of Oasis since 2010, having previously been senior counsel at Targa Resources and counsel and senior counsel at Burlington Resources. Before that, the University of Houston-trained lawyer was an associate at what was then known as Bracewell & Patterson.
Duke Law-educated Williams practiced at V&E and Fulbright & Jaworski before joining Oasis in 2012. Lancton, also a UH law graduate, was an attorney at Baker & McKenzie before Oasis brought him on last year while UT Law grad Buce was an associate at Bracewell before coming on board in 2014.
The $946 million purchase price includes $483 million in cash and 46 million shares of Oasis’ stock valued at $463 million as of the close of trading Dec. 8.
Oasis said it’s funding the purchase through a combination of shares issued to the seller, a draw on its revolving credit facility and/or capital markets transactions, depending on market conditions. Oasis also expects to sell non-core Williston Basin acreage for up to $500 million next year, which could provide more work for V&E.
The acquisition is expected to close in February.
The markets weren’t too keen on the purchase, sending Oasis’ stock down 17.25% on the New York Stock Exchange to $8.32 per share given the equity deal’s dilutive effect on shareholders, the rich price Oasis is paying for the assets ($38,200 per acre, what analysts say is the highest in the basin this year) and the debt the company may have to take on to fund the purchase.
But Oasis chairman and CEO Tommy Nusz said in a statement that the accretive transaction will more than double Oasis’s core net inventory and represents an opportunity to acquire a highly complementary asset to its Williston Basin acreage.
“Our new Permian assets deliver a consolidated position in the deepest and highest pressured part of the Delaware in the heart of the oil window,” he said. “The seller and offset operators have materially de-risked this position with recent well performance across the Wolfcamp and Bone Spring formations, giving us additional confidence in asset quality and well performance.”
Nusz said the company expects its exploration and production business to be free cash flow positive next year if oil prices stay at $55 per barrel or above.