Vinson & Elkins and Latham & Watkins advised on Vantage Energy Acquisition Corp.’s $1.65 billion purchase of oil and gas properties in North Dakota’s and Montana’s Williston Basin from a unit of QEP Resources Inc.
QEP also could get up to 5.8 million shares of Vantage stock if certain stock price targets are hit, which would value the deal at $1.725 billion.
QEP tried to sell the properties earlier this year as part of its plan to focus only on the Permian Basin but was unsuccessful. Simmons & Co. International analyst Kashy Harrison said the purchase price came in below his $2.2 billion expectation and appears to only value the assets’ proved developed producing reserves.
Harrison thinks QEP could next sell its natural gas properties in East Texas’ and northern Louisiana’s Haynesville Shale given expectations that natural gas prices will continue to rise due to colder weather and low inventory levels. Analysts at TPH expect that sale to fetch $750 million and could make QEP a takeover target.
Investors of Vantage Energy Acquisition, which is special purpose acquistion company, will own 63 percent of Vantage Energy Inc. and backer NGP Capital Management will hold 37 percent.
V&E partner Bryan Loocke, associate Cesar Leyva, senior associate Emery Choi and associate Josh Rocha led the firm’s deal team.
Specialists included partner John Lynch and associate Curt Wimberly on tax; partner Sean Becker (labor/employment); partner Stephen Jacobson and associate Kristy Fields (executive compensation/benefits); partner Larry Nettles and senior associate Matt Dobbins (environmental); senior associate Nick Shum and associate Stephanie Noble (litigation); and associates Kara Chung, Ed Vaunder, Ben Glass and Tukeni Obasi (corporate).
V&E associates Caitlin Snelson and Arthur Munoz were on the finance team. Partner Ramey Layne and senior associate Doug Lionberger led the capital markets team with assistance from associate Jing Tong.
Latham & Watkins assisted QEP. The team included partners Stephen Szalkowski, John Greer, Debbie Yee and Michael Dillard.
The team also included associates Sean McKinley, Bo Rose and Erin Lee on oil and gas and M&A matters. Partner Tim Fenn and associate Jim Cole worked on tax matters while counsel Natalie McFarland and associate Bryce Kaufman worked on finance. Partner Joel Mack weighed in on environmental issues.
Citigroup and Goldman Sachs & Co. were Vantage’s financial advisors on the deal and provided committed financings to support the acquisition along with BMO Capital Markets, which assisted QEP.
Vantage plans to finance the transaction with $560 million in cash, $185 million in proceeds from an equity issuance and $642 million in debt, including a $400 million bridge to a proposed bond offering and $242 million drawn on a $900 million credit facility.
The company is expected to have an initial enterprise value of $1.52 billion and generate an estimated $427 million in EBITDA next year, thus valuing the deal at 3.6 times next year’s anticipated EBITDA. Vantage intends to propose an initial annual dividend of 25 cents per share.
Denver-based Vantage Energy Acquisition – which went public in April of last year – will change its name to Vantage Energy Inc. and trade on the NASDAQ. Closing is expected in the first or second quarter if the deal clears Vantage Energy Acquisition shareholders.
Vantage said the deal creates a top oil-weighted, pure-play Williston Basin independent oil and gas operator with strong free cash flow and low-risk growth opportunities.
The company said the properties involved are primarily operated, high working interest assets focused in the core of the Bakken, including the South Antelope and Fort Berthold. They cover 100,000 net acres and produce 46,000 barrels of oil equivalent per day.
“We believe the combination of outstanding cash margins, a robust base of oil-weighted production and an attractive set of development drilling and refrac projects with attractive economics will position Vantage to deliver exceptionally efficient growth in both EBITDA and free cash flow,” Vantage said.
Vantage Energy Acquisition chairman and CEO Roger Biemans – who previously was president of Encana Oil & Gas (USA) – will lead Vantage Energy Inc. full-time.
David Wolf will join Vantage as CFO. Wolf is CEO of EnCap Investments-backed Fuse Energy and formerly was the CFO of Berry Petroleum and a long-time investment banker at JP Morgan.
Vantage expects to keep a big chunk of QEP’s High Plains business unit team, including its operations, engineering, geoscience, land, administrative and finance groups.
Biemens said in a statement that since Vantage’s IPO, it’s evaluated acquisitions across North America with a focus on resource quality and equity value creation.
“Vantage represents a highly-differentiated return of capital opportunity for our shareholders, with a day-one dividend and a deep inventory of low-risk, high-return reinvestment opportunities,” he said. “The valuation of the transaction presents an attractive, low-multiple investment opportunity with significant upside in a basin with rapidly improving well results.”
Scott Gieselman led the deal from NGP, which will have two appointees on Vantage’s seven-member board. Biemans will be as chairman of the board, which will have four independent directors.