(Source: Business Wire)
Resolute Natural Resources Company, an independent oil and gas company with long-lived oil reserves, and Hicks Acquisition Company I (AMEX: TOH), a special purpose acquisition company founded and headed by Thomas O. Hicks, today announced a definitive agreement pursuant to which Resolute will go public through a transaction with Hicks Acquisition valued at $582 million. Following completion of the transaction, the combined enterprise will be renamed Resolute Energy Corporation and will apply for listing on the New York Stock Exchange.
Resolute, founded in 2004 by its management team, and Natural Gas Partners, a leading private equity investment firm specializing in the energy industry, is focused on the acquisition, exploitation and development of oil and gas properties with a particular emphasis on long-lived onshore U.S. opportunities. The company's principal assets are a tertiary oil project in southeast Utah and a conventional gas field in the Powder River Basin of Wyoming. The company owns the majority of the interests in and operates virtually all of its wells. In addition to its producing properties Resolute owns exploratory acreage in the Big Horn Basin of Wyoming and the Black Warrior Basin of Alabama.
Resolute's assets are 91% oil with proved reserves of 49.3 million barrels of oil equivalent based on year end SEC case engineering and a proved reserves to production ratio of 18 years at year-end 2008. With the rebound in oil prices since year-end 2008, a mid-year reserve analysis would result in significantly higher reserve levels, which Resolute anticipates will occur at year-end 2009 if commodity prices maintain or rise above current levels. In the first quarter of 2009 Resolute produced, on average, 7,626 barrels of oil equivalent per day net to its interest. Approximately 85% of Resolute's first quarter revenue was from oil sales.
The NGP and Resolute management team will contribute their entire equity position to Resolute. Following the completion of the transaction the Hicks Founder and Sponsor, NGP and management will together own approximately 26% of Resolute. Hicks public shareholders will own approximately 74% of the new entity.
The transaction value implies an enterprise value to proved reserves ratio of $11.80 per barrel of oil equivalent, and an enterprise value to 2010 estimated EBITDA multiple of 6.5x, an attractive valuation relative to the closest comparables. Proceeds from the transaction will be used to repay a substantial portion of Resolute's outstanding debt. Resolute's post transaction debt balance will be well below the industry average and will provide the company with the financial flexibility to pursue organic growth and to capitalize on acquisition opportunities.
Thomas O. Hicks commented, "Resolute has all of the characteristics that we believe are essential for a company to succeed in the public markets: a high quality management team with extensive experience and success in the upstream oil and gas business, a strong and flexible balance sheet, and a focused asset play in a sector poised for significant activity. In addition, Hicks Acquisition shareholders benefit from acquiring Resolute at a compelling valuation relative to its publicly traded peers. We look forward to completing the transaction and supporting the management team going forward in order to realize Resolute's full operational, financial and investment potential."
"This is an exciting time to invest in the oil and gas industry," added Nicholas J. Sutton, Chairman and CEO of Resolute, who will continue to lead the company as CEO of the combined entity. "Our operations are strategically located on properties with large, well identified quantities of oil in place, and through proven techniques such as CO2 injection and waterflooding we believe we have the opportunity to significantly increase oil production on a short-term as well as a long-term basis."
Sutton continued, "As a result of this transaction Resolute will be well positioned to generate strong returns for investors through the combination of its long-lived properties, a management team with extensive experience and proven results in upstream operations, the expected strong growth in demand for oil and gas, the potential for positive pricing trends, and a greatly improved balance sheet. We are pleased to partner with Hicks Acquisition, a group of experienced investment professionals with a demonstrated successful track record in the energy industry, and to have the continued support of NGP, a leading energy industry investment firm, both of which will remain significant investors in Resolute."
Mr. Sutton and the majority of his senior management team previously worked together as the management of HS Resources, Inc., an independent oil and gas company that was listed on the New York Stock Exchange prior to being sold to Kerr-McGee Corporation for $1.8 billion.
"Given Resolute's high quality asset base and management's strong track record of success, we are pleased to contribute our entire equity ownership in support of Resolute's significant growth potential as a public company," said Kenneth A. Hersh, Managing Partner of Natural Gas Partners. "Nick and his senior management team are among the best in the business and NGP's relationship with them dates back more than 18 years to when we made our first investment in HS Resources. At that time, HS Resources was a small private company co-founded by Nick that grew to be a highly successful independent oil and gas company.
